Magnificent Seven Valuations Drop Below 25x, Amazon Faces Cash Flow Slump
Amazon and peers in the Magnificent Seven index now trade under 25x projected profits, down from nearly 33x in October and below their 10-year average of 29x. Combined free cash flow for Amazon, Microsoft, Alphabet and Meta is forecast at $94 billion this year, down from $205 billion in 2025.
1. Magnificent Seven Valuations Slide
Amazon and its Magnificent Seven peers are trading below 25x projected earnings, down from nearly 33x in October and below their 10-year average of 29x, marking the lowest valuations since the tariff-driven selloff in April.
2. AI Infrastructure Drives Cash Flow Decline
Heavy investment in AI computing infrastructure has pushed combined free cash flow for Amazon, Microsoft, Alphabet and Meta down to a forecasted $94 billion this year, compared with $205 billion in 2025 as capex ramps up across the cohort.
3. Outlook for Amazon
With valuations near decade lows and sector outflows beginning to reverse following geopolitical-driven oil price spikes, Amazon may regain market leadership if spending stabilizes and free cash flow recovers.