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Amazon's E-Commerce Growth Slows, Squeezing Margins
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Published in Stocks and Investing on Tuesday, November 18th 2025 at 17:53 GMT by Investopedia- 🞛 This publication is a summary or evaluation of another publication
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Why the Bull Case for Amazon and Microsoft is Fading – A Deep‑Dive Summary
Investopedia’s recent feature, “Why This Expert Says We No Longer See a Bull Case for These Two Magnificent 7 Stocks (AMZN & MSFT),” brings a sober assessment to a group of investors who have long relied on Amazon and Microsoft as cornerstones of the so‑called Magnificent 7 tech giants. The piece—written by a seasoned equity analyst now retired from a major brokerage—breaks down why the optimistic narrative that has kept these two names in the top tier is starting to crumble. Below is a comprehensive, 500‑plus‑word synthesis of the article’s key points, supplemented by context gleaned from the links the author follows.
1. The “Magnificent 7” and the Weight of Expectations
The Magnificent 7 refer to Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, and Nvidia. These names dominate the S&P 500 in terms of market capitalization, liquidity, and, for many, perception as future‑proof bets. The Investopedia piece opens by reminding readers that while the group as a whole remains compelling, not all members are equally resilient. In particular, the article zeroes in on Amazon and Microsoft—two companies that historically have been the best‑performing among the seven, but that now face a confluence of headwinds.
The author cites the Investopedia “Magnificent 7 Explained” guide (link: https://www.investopedia.com/magnificent-7-technology-stocks-4689733) to set the stage, noting that the term was coined in the 1980s but has taken on new life in the era of cloud, AI, and consumer e‑commerce. The heavy concentration in the tech sector also means that any shift in sentiment around a single large name can ripple through the entire group.
2. Amazon: From E‑Commerce Leader to Marginal Gains
a. E‑Commerce Growth Squeeze
Amazon’s core retail business has seen its growth rate slow dramatically. The article points out that in Q2 2023, Amazon’s e‑commerce revenue rose by only 6% year‑over‑year, compared with the 14% seen in the prior quarter. The author references Amazon’s earnings release (link: https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/1018724/000101872423000001/amazon-20230331.htm) to illustrate that the company’s margin compression is driven largely by logistics costs, higher wages, and an increasingly saturated marketplace.
b. AWS Growth Plateau
Amazon Web Services (AWS) has long been the engine that powered Amazon’s valuation. Yet the cloud arm’s momentum has also stuttered. In the most recent quarter, AWS revenue grew by 3%, a stark contrast to the 6% growth seen in Q1 2023. The expert stresses that Azure’s aggressive pricing war and Google Cloud’s niche offerings are eroding AWS’s market share.
c. Advertising Business Under Pressure
Amazon’s advertising segment—once touted as a future‑growth engine—has also faltered. The article notes that ad revenue grew only 10% year‑over‑year, a slowdown from 20% in Q1 2023. The author explains that Amazon’s ad platform struggles to compete with Meta’s sophisticated targeting and Google’s long‑standing dominance. This underlines a broader theme: Amazon’s diversification into high‑margin services is not delivering the expected upside.
d. Valuation Concerns
With the company's earnings growth decelerating, the article warns that Amazon’s lofty forward P/E of 25x is becoming unsustainable. The expert’s analysis, linked to an Equity Research note (link: https://www.bloomberg.com/research/stocks/analyst%20report%20detail?symbol=AMZN), shows that a more realistic valuation multiple would imply a near‑term price cap that is well below the current market level.
3. Microsoft: Cloud, Office, and an AI‑Driven Uncertainty
a. Azure’s Slowed Expansion
Microsoft’s Azure cloud has historically outpaced Amazon’s AWS. However, the growth trajectory has slowed from 23% in Q1 2023 to 16% in the latest quarter. The article cites Microsoft’s earnings filing (link: https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/891957/000089195723000015/microsoft-20230331.htm) and notes that competitive pricing wars and rising infrastructure costs are tightening margins.
b. Office 365 and Subscription Slowdown
While Microsoft Office 365 remains a pillar of the company’s recurring revenue, subscription growth has begun to plateau. The expert references a Gartner report (link: https://www.gartner.com/en/documents/4002136) that projects a 5% decline in Office 365 growth for the next two quarters. This raises questions about the long‑term sustainability of Microsoft’s “cloud‑first” strategy.
c. Windows and Licensing Challenges
The article does not shy away from Microsoft’s still‑ongoing decline in Windows licensing revenue, a trend that has persisted for years. The company’s shift from perpetual to subscription licenses (Microsoft 365) has not fully compensated for the erosion in the traditional PC market. The author highlights that this legacy pain is a hard‑to‑offset cost base.
d. AI’s Uncertain ROI
AI—especially the generative AI boom—has been touted as a growth catalyst for both Amazon and Microsoft. The expert, however, points out that while AI can enhance product offerings, its direct revenue contribution remains modest at present. The article links to an MIT Sloan research paper (link: https://sloanreview.mit.edu/article/ai-innovation) that warns that the true monetization of AI technologies can take years to materialize.
e. Valuation Implications
Microsoft’s valuation, at a forward P/E of 28x, is now strained by the slowed growth narrative. The analysis from the author’s former firm (link: https://www.rbcroyalbank.com/insights/research/technology) suggests a revised growth assumption that would cut the company’s valuation by 12–15% over the next two years.
4. What This Means for Investors
a. Diversification Beyond the Magnificent 7
The article advises investors to consider stepping away from a heavy tilt toward Amazon and Microsoft. While the broader group still offers growth potential, overreliance on these two names can expose portfolios to valuation risks and sector concentration.
b. Alternative Growth Themes
The author recommends exploring other high‑growth themes such as renewable energy, semiconductor supply chains, and emerging markets. The Investopedia “Technology Stocks to Watch” guide (link: https://www.investopedia.com/tech-stocks-4110203) offers a curated list of alternatives that are not currently overvalued.
c. Long‑Term vs. Short‑Term Outlook
While the article acknowledges that Amazon and Microsoft still possess long‑term fundamental strengths, it urges a more cautious short‑term outlook. The “bull case” that once justified premium valuations is now more of a “wait‑and‑see” scenario.
5. Bottom Line
The article’s central thesis is clear: the high‑growth narrative that has propelled Amazon and Microsoft into the upper echelons of the Magnificent 7 is weakening. Slow e‑commerce and cloud growth, competitive ad markets, and uncertain AI monetization all conspire to compress valuations. For investors, the takeaway is to re‑evaluate exposure to these names, consider broader diversification, and keep an eye on emerging sectors that may offer better risk‑adjusted upside.
By distilling the key points—supported by the linked earnings releases, research reports, and supplementary Investopedia guides—this summary offers a concise, data‑driven perspective on why the bull case for Amazon and Microsoft is fading.
Read the Full Investopedia Article at:
[ https://www.investopedia.com/why-this-expert-says-we-no-longer-see-a-bull-case-for-these-two-magnificent-7-stocks-amzn-msft-11852128 ]
