I keep hitting the buy button on Amazon (NASDAQ:AMZN | AMZN Price Prediction), and the $25 billion bond sale gave me three fresh reasons to keep going. I have owned this stock for years, and every time management pulls a lever this obvious, I add. The market treated the debt raise like a warning. I read it like a receipt.
The Cost of Capital Arbitrage I Keep Waiting For
The 10-year Treasury sits at 4.55%, in the 94th percentile of the past 12 months. That yield looks rich in a vacuum, yet Amazon’s interest coverage ratio is 35.17x, which means the company can absorb this coupon in its sleep. Peak demand on the offering hit $62 billion, 2.48 times oversubscribed, across eight tranches maturing from 2029 to 2066. Institutional buyers effectively fought each other to hand Amazon 40-year money. That preserves the $101.82 billion of cash on the balance sheet for acquisitions, chip design, and whatever Andy Jassy sees next. Debt funds the concrete. Cash stays weaponized.
The Capex Is Already Pre-Sold
This is where I get loud with friends who think Amazon is overspending. The roughly $200 billion 2026 capex plan funds physical data center capacity backed by AWS’s $364 billion commercial backlog. AWS grew 28% year over year in Q1, the fastest in 15 quarters, at a 37.7% operating margin. Anthropic is contracted for up to 5 GW of Trainium capacity. OpenAI committed roughly 2 GW starting 2027. Project Rainier is deploying 500,000-plus Trainium2 chips. The chips business already runs at a $20 billion annual revenue rate, growing triple digits. The bonds pay for buildings that are already leased in economic terms.
Peak Debt, Then the Runway Clears
Management framing this as the final debt tap of the year removes an overhang I was already discounting. Operating cash flow hit $139.51 billion in 2025 against $131.82 billion of capex. Debt-to-assets improved from 30.3% in 2022 to 18.7% in 2025 even while the asset base doubled. Once capex intensity normalizes, free cash flow snaps back and the multiple has room to breathe.
Why Amazon, Not Microsoft or Alphabet
I looked hard at Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL). Both are quality. Neither has the same operating leverage story from here. Amazon’s North America retail margin expanded to 7.9% from 6.3%, international operating income grew 40%, and Q1 EPS of $2.78 beat the $1.73 consensus by 60.69%. That is a fifth consecutive beat. I also passed on Walmart (NYSE:WMT) because retail alone cannot compound against a business where advertising just crossed $70 billion in trailing revenue growing 24%. Amazon pays no dividend, and that suits me. Every retained dollar funds Trainium, robotics, and Leo satellites.
The Risk I Own Openly
Free cash flow collapsed. TTM free cash flow fell 95% to $1.2 billion as property and equipment purchases jumped $59.3 billion year over year. If AWS demand ever wavers, that capex looks foolish. I keep buying because the $364 billion backlog is contractual, the Bedrock platform processed more tokens in Q1 than in all prior years combined, and interest coverage of 35x leaves room for a bad year.
Analysts carry a $314.35 average target against my $249.89 cost basis today. That gap is my margin of safety, and the bond sale just financed the growth that closes it. My buy button stays warm.
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