Since completing its 20-for-1 stock split in June 2022, Amazon (AMZN) shares have nearly doubled. Yet by one critical measure, the tech giant is meaningfully cheaper today than it was just after the split — a paradox that gets to the heart of Amazon’s current investment case.
The key isn’t the widely followed price-to-earnings ratio. It’s the price-to-operating cash flow multiple. Shortly after the 2022 split, Amazon traded at roughly 32 times operating cash flow per share. Today, that figure has compressed to around 18 times.
Why focus on operating cash flow rather than free cash flow? Because Amazon is currently spending at an unprecedented pace to build out the data center infrastructure that will power the next wave of artificial intelligence. That capital expenditure temporarily depresses free cash flow, but operating cash flow provides a purer read of the underlying earning power of the business. In short, Amazon’s ability to generate cash has grown far faster than its share price.
The single biggest force behind record operating cash flow is Amazon Web Services. After a brief growth deceleration, the cloud division has found a new gear: revenue climbed 28% year over year last quarter, pushing trailing 12-month sales to $137 billion. Operating income from AWS over the same period reached $48 billion, accounting for the lion’s share of Amazon’s total profit. In the most recent quarter, AWS delivered a striking 38% operating margin.
What makes AWS more valuable now than at the time of the split is artificial intelligence. Amazon is no longer simply a landlord of raw compute. Its custom-designed AI training chips, Trainium, and its Graviton Arm-based CPUs have become a significant business in their own right — annualized revenue has surpassed $20 billion. Even more telling, the company holds over $225 billion in long-term commitments tied to Trainium usage, with customers that include AI powerhouses Anthropic and OpenAI. As enterprises scramble to bring down the cost of running AI workloads at scale, Amazon’s combination of custom silicon and cloud infrastructure is hitting the market at exactly the right moment, steadily pushing up the already-high profit ceiling of AWS.
At the same time, the retail efficiency overhaul that drew attention around the split has not lost momentum. Robotics and cost discipline continue to improve the profit contribution from Amazon’s core commerce operations, while advertising, streaming, and other services add fresh layers of growth. This multi-engine profit structure has lifted operating cash flow to a record $148 billion over the past 12 months — a far larger earnings base than existed in 2022.
That is why the valuation has compressed even as the stock price has surged: operating cash flow per share has risen even faster than the share price. For investors, owning a company that commands cloud market leadership, is riding an AI chip boom, and rests on a resilient retail foundation at 18 times operating cash flow looks considerably more attractive than buying it at 32 times right after the split.
When analysts forecast that Amazon will surpass $1 trillion in revenue by 2028, they are betting on exactly the cycle now in motion — using heavy capital spending today to widen a long-term moat. After doubling in price, Amazon may be offering rational investors a wider margin of safety than it did when the split first made headlines.
