At today's price, Amazon's stock is pricing in about 27% annual free-cash-flow growth for the next ten years. Over the past five years, revenue grew 11.1% a year and operating income 33.9% a year — while free cash flow itself actually shrank as AI investment surged.
At its current price, AMZN implies ~27% annual FCF growth for the next 10 years, discounted at 9%.
Amazon's actual 5-year revenue growth has averaged 11.1% a year, and operating income 33.9% — while FCF itself has recently shrunk.
Required growth vs. historical growth
Required growth from the reverse DCF below. Historical CAGRs calculated directly from 10-K FY2021–FY2025. The 2-year FCF figure reflects an AI-capex-driven decline, not a business downturn.
Sensitivity: what if the discount rate moves?
| WACC | Required annual growth |
|---|---|
| 8% | 24.2% |
| 9% (base case — large-cap) | 27.1% |
| 10% | 29.7% |
| 12% | 34.5% |
What would move this number
- Which FCF base you use swings this dramatically. The base case uses a 3-year average ($28.74B). Using 2025 alone ($11.2B) instead spikes the required growth rate to 40.6%. Using the most recent trailing-12-month figure (as of Q1 2026, just $1.2B) pushes it to an implausible 76.7% — suggesting the market is treating the recent capex surge as temporary rather than permanent.
- Lowering the discount rate to 8% brings the required rate to 24.2%; raising it to 12% pushes it to 34.5%.
- Amazon's net cash position (about $21.2B) modestly reduces the required growth rate versus a company carrying net debt.
Show your work
Five inputs, sources, model assumptions, and the calculation
- Share price$262.65 — stockanalysis.com, Aug 14, 2026, 4:00pm ET close
- Diluted shares outstanding10,874M — 10-Q Q1 FY2026, quarter ended Mar 31, 2026
- Free cash flow (3-year average)$28.74B — FY2023 $36.8B, FY2024 $38.2B, FY2025 $11.2B
- Net debt$121.9B debt − $143.1B cash & securities = −$21.2B (net cash), per 10-Q Q1 FY2026
- Discount rate (WACC)9% base case (8% / 10% / 12% tested)
Why a 3-year average: 2025's FCF ($11.2B) sits 61% below the 3-year average — beyond the ±40% normalization threshold — driven by AI infrastructure capex rising from $77.7B (2024) to $128.3B (2025). The base case therefore uses the 3-year average, with the 2025-only and TTM figures shown separately above for context.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's enterprise value (market cap + net debt).
The fine print
- Change the discount rate, the FCF base, the projection window, or the terminal growth rate, and the answer moves.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- Whether AWS's AI demand can actually sustain 27%-a-year cash-flow growth is the real question here — not something this math answers on its own.
- Any investment decision, and its outcome, is your own responsibility.
Frequently asked questions
What growth rate does AMZN's stock price assume?
At today's price, Amazon's stock is pricing in about 27% annual free-cash-flow growth for the next ten years.
How does that compare to Amazon's actual growth?
Over the past five years, Amazon's revenue grew 11.1% a year and operating income 33.9% a year, but free cash flow itself actually shrank as AI infrastructure investment surged — a very different picture from the ~27% FCF growth the price requires.
What share price was used for this analysis?
This analysis used $262.65, Amazon's closing price on Aug 14, 2026, as of Aug 17, 2026.