The growth of Amazon Web Services (AWS) has been nothing short of extraordinary, as highlighted by Charlie Bilello’s data. AWS revenue has increased from just $3 billion in 2013 to $100.3 billion by Q3 2024, marking a 33x growth in just over a decade. To put this into perspective, AWS alone now generates more revenue than 468 companies in the S&P 500. And yet, despite such massive growth, Amazon’s stock has not followed the same trajectory in recent years.
Stock Performance vs. Company Growth
While one might expect that a 33x revenue increase would translate into a massive stock price surge, Amazon’s stock has not seen the same kind of movement, at least in the last few years. Since 2020, the stock has fluctuated between $180 and $250, showing no major trend despite AWS’s strong performance. The reason? The stock market often discounts future growth well in advance. If a company’s expected performance is already priced in, further stock movement depends on whether actual results exceed or fall short of market expectations.
Why Stocks Move Differently from Earnings Reports
There is often a lag between company performance and stock price movements. When a company announces earnings, it reflects past performance over the last three months. However, the stock price is based on expectations of future performance. If a company’s earnings meet or slightly beat expectations, there may not be much movement. But if there is a major surprise—either positive or negative—then the stock can react sharply.
Avoid the Trap of Looking at Past Growth
Many investors make the mistake of buying stocks purely based on a company’s past growth, assuming that if a company has done well, its stock will automatically follow. But the reality is that markets discount future growth in advance. A stock may remain stagnant or even decline despite strong fundamentals if the expected growth is already priced in.
Follow the Price, Not Just the Narrative
As often said in price-based investing, the price tells you the direction before the narrative does. While fundamentals matter in the long run, short-term and even medium-term stock movements are dictated by market expectations, liquidity, and sentiment. That’s why relying purely on earnings reports or past growth without analyzing price trends can be misleading. Always follow the price action and let it guide your decisions rather than getting caught up in company narratives alone.
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