Every Amazon (AMZN) Investor Should Keep an Eye on This Number
Amazon (AMZN) reported $670 billion in net sales and a market cap of $2.4 trillion. Investors should focus on free cash flow (FCF), which measures cash after expenses and capital expenditures. FCF rose from losses in 2021-2022 to $36.8 billion in 2023 and $38.2 billion in 2024. However, analysts predict a decline to $23.5 billion this year due to heavy AI investments. Monitoring FCF is crucial for understanding Amazon's financial health and future prospects.
Some businesses are too small to catch the attention of investors, but Amazon (AMZN -1.03%) doesn't fall into this category. It's a massive enterprise that collected $670 billion in net sales in the trailing-12-months, and its market cap sits at an enormous $2.4 trillion.
Despite all the attention Amazon receives, though, these investors might not be tracking all the right data points to gauge the fundamental strength of the company -- and that can lead them astray.
For instance, here's one number Amazon shareholders should definitely be keeping an eye on.
Image source: Amazon.
Free cash flow is a critical metric to follow
Free cash flow (FCF) measures the amount of cash a company collects after it covers all operating expenses and pays for capital expenditures. It's essentially what's left over after money goes to running and growing the business. Some might view it as a more accurate indicator of profitability.
Amazon's FCF has soared in recent years. It went from losses in 2021 and 2022 to positive $36.8 billion in 2023 and $38.2 billion in 2024.
Amazon is spending heavily on AI infrastructure
Assessing Amazon's financial success is particularly important, as the company spends a huge amount of capital on artificial intelligence (AI). The hope is that FCF can keep growing, which might indicate signs of positive returns for all those capital outlays made in prior years.
And while the figure grew in the past two years, analysts forecast a notable year-over-year decline in FCF to $23.5 billion this year, likely related to increased investment in AI initiatives. Investors should pay attention to Amazon's FCF going forward, as it will offer real insight into where Amazon's business is going.
