Amazon.com ((AMZN Quick QuoteAMZN - Free Report) ) heads into its upcoming earnings report as the clear laggard among the Magnificent Seven. The stock is up just 5% year-to-date and has been essentially flat over the past three months, a period that’s been broadly strong for large-cap tech. Over that stretch, Alphabet ((GOOGL Quick QuoteGOOGL - Free Report) ) and Tesla ((TSLA Quick QuoteTSLA - Free Report) ) have led the group, rallying 39% and 44%, respectively.

Despite that underperformance, Amazon may be setting up for a rebound. The stock now trades at 33.3× forward earnings, one of the most attractive valuations in its history and a reasonable multiple given its diversified growth engines in e-commerce, cloud computing, and digital advertising. From a technical standpoint, shares have been consolidating tightly since August and could be forming a base for a potential breakout if this quarter’s results exceed expectations.

For the upcoming report on Thursday, analysts expect earnings of $1.57 per share, up 9.8% year-over-year, on revenue of $177.9 billion, an increase of 12% from the prior-year period. Importantly, earnings estimates have turned higher over the past week, lifting Amazon to a Zacks Rank #2 (Buy) and signaling improving sentiment heading into the results.

Image Source: Zacks Investment Research

Amazon Founder Bezos Bullish on AI

While Jeff Bezos is no longer CEO, his recent comments show he remains deeply engaged in Amazon’s strategic direction, especially regarding artificial intelligence. Generative AI is a clear growth driver for Amazon Web Services (AWS), the company’s dominant cloud division, but Bezos has emphasized the broader opportunity to embed AI across operations.

He’s described the integration of AI as his top priority, envisioning its use to enhance logistics and drive significant productivity gains. Just this week, we saw that Amazon plans to lay off some 30,000 employees. Could this be the first sign of the company’s increasing efficiency? 

This operational focus may prove pivotal as public markets begin to separate AI adopters from AI executors. Amazon, with its data scale and infrastructure, appears well positioned to emerge as one of the leaders in this next phase of AI-driven transformation.

Earnings Revisions, Valuation, and Technical Setup

Amazon’s earnings momentum remains strong. The company has beaten analyst expectations in 11 consecutive quarters, with an average surprise of 23% over the past year. The Zacks Earnings ESP currently projects an additional 8.9% beat for this quarter, suggesting analysts may still be underestimating performance.

Looking ahead, earnings are forecast to grow 22.2% annually over the next three to five years, the second-highest growth rate among the Magnificent Seven, with sales expected to continue expanding at a steady double-digit clip. Combined with margin expansion and a reasonable valuation, the setup remains favorable.

Technically, the stock has been consolidating just below resistance since early summer. A strong earnings beat and upbeat guidance could be the catalyst that propels shares higher and confirms a breakout from this multi-month base.

Image Source: TradingView

Can Amazon Stock Play Catch-Up?

After a year of muted performance, Amazon now finds itself at an inflection point. The company has the earnings power, operational leverage, and AI-driven tailwinds to narrow the gap with faster-moving peers like Alphabet and Tesla, both of which have surged in recent months.

If Thursday’s results reaffirm improving margins and accelerating growth within AWS and its retail operations, Amazon could finally rejoin Alphabet and Tesla in leading the next leg of the Magnificent Seven rally. For investors, the stock’s combination of reasonable valuation, rising estimates, and emerging technical strength makes this one of the most important quarters to watch for a potential breakout