Amazon Shakes Up Grocery Strategy And Bets Big On AI

Shares of Amazon.com Inc. have been on a rollercoaster ride over the past year, with investors closely watching the tech giant’s every move as it navigates a rapidly changing retail and technology landscape. After a rocky patch that saw the stock drop 6.38% over five days, Amazon rebounded with a 5.83% gain in the following week, according to 24/7 Wall St. The rally was fueled by a bold announcement on January 27, 2026: Amazon would be closing all of its Amazon Go and Amazon Fresh brick-and-mortar locations, pivoting instead toward grocery delivery, its Whole Foods Market brand, and a new supersized store concept.

The market responded swiftly. On the day of the announcement, Amazon shares jumped nearly 3%. Rival grocers Kroger and Albertsons, meanwhile, saw their stocks tumble about 3% each, as reported by CNBC. Investors interpreted Amazon’s shift as a sign of renewed aggression in the grocery wars—one that could shake up the entire sector.

This strategic pivot comes at a time when Amazon is under pressure to streamline its operations and refocus on its most promising business lines. The company’s Q3 2025 earnings, released on October 30, beat Wall Street expectations with an EPS of $1.95 (versus an estimated $1.57) and revenue of $180.17 billion, topping the $177.80 billion analysts had predicted. Amazon Web Services (AWS) contributed $33 billion in revenue, while advertising brought in $17.7 billion—a 24% year-over-year increase from the previous year’s quarter.

Despite these strong numbers, concerns linger about Amazon’s massive investments in artificial intelligence and automation. In October 2025, leaked documents suggested the company aimed to replace around 600,000 jobs with robots by 2027, a move management believes could shave 30 cents off the cost of every item sold. By July 2025, Amazon had already deployed its one millionth robot, powered by a new AI foundation model designed to optimize its robotic fleet.

Amazon’s bet on AI doesn’t stop there. The company is preparing to launch its own proprietary AI model, Nova, in June 2026. Nova is intended to compete directly with OpenAI’s ChatGPT, Anthropic’s Claude 3.7 Sonnet, and Google’s Gemini 2.0 Flash Thinking, promising advanced reasoning capabilities at a lower cost. The move signals Amazon’s determination to remain at the forefront of the AI race—a sector that CEO Andy Jassy describes as offering “massive opportunity.” As Jassy has emphasized, Amazon’s AI platform is multilayered, encompassing custom large-language models, the Bedrock program, and a suite of plug-in tools for smaller companies.

The company’s ambitions in cloud computing remain undiminished. AWS, which reported a $200 billion backlog for AI development clients, is expected to break $100 billion in total sales in 2026, continuing its 20% year-over-year growth trajectory. However, competition is fierce. Microsoft’s Azure and Alphabet’s Google Cloud are nipping at AWS’s heels, threatening to erode Amazon’s market share if it can’t innovate fast enough.

Advertising has emerged as another high-margin engine of growth for Amazon. In the third quarter of 2025, the company reported $17.7 billion in ad revenue, up 24% from the previous year. Analysts expect this segment to keep outperforming, with projections that advertising could grow into a $47 billion business unit by 2030, compounding at a high teens annual growth rate.

Amazon’s e-commerce business, the foundation of its global empire, is also evolving. While the pandemic drove record sales in 2020 and 2021, the subsequent years brought new challenges as competitors ramped up their own online offerings. As of early 2026, e-commerce still accounts for just 15% of total retail sales, and Amazon faces stiffer competition than ever before. Nevertheless, the company retains a dominant position, with CEO Andy Jassy noting that “80% to 85% of retail still takes place in physical stores,” leaving ample room for further online growth.

To capitalize on this opportunity, Amazon is experimenting with new retail formats. The company recently announced plans to open its largest-ever physical store outside of Chicago, which will be bigger than the average Walmart or Costco. This supersized store concept reflects Amazon’s willingness to keep trying new approaches in the brick-and-mortar space, even as it shutters other outlets and refines its grocery strategy.

Looking at the numbers, Amazon’s growth over the past decade has been nothing short of staggering. From 2014 to 2024, the company’s revenue soared by 616.8%, reaching $637.96 billion in 2024 with a net income of $59.2 billion. The company’s stock price has mirrored this ascent: since January 2005, Amazon’s shares have risen over 10,872%, making it one of Wall Street’s top performers outside of NVIDIA.

Still, the question on every investor’s mind is: what comes next? Wall Street analysts currently peg Amazon’s median one-year price target at $294.76, which would represent a 20.46% upside from current levels. 24/7 Wall St. offers a slightly more conservative year-end 2026 forecast of $262.90, equating to a potential 7.44% gain. Both projections are buoyed by expectations that AWS will maintain robust growth and that advertising will continue to outperform.

Looking further ahead, 24/7 Wall St. projects Amazon’s revenue could hit $1.15 trillion by 2030, with net income of $131 billion. Their model estimates a stock price of $524.67 by the end of the decade—a 114.43% increase from January 2026. These forecasts assume Amazon can fend off cloud competitors, drive efficiencies through robotics, and keep expanding its high-margin advertising business.

Of course, no forecast is a sure thing. As 24/7 Wall St. cautions, "No one has a crystal ball, and even Wall Street is wrong just as often as it is right when it comes to predicting future stock prices." The only certainty is that Amazon will continue to adapt, experiment, and invest aggressively in pursuit of growth.

For investors, the company’s upcoming fourth-quarter and full-year earnings report, scheduled for February 5, 2026, will offer fresh insights into its progress. As The Motley Fool notes, the real story lies in Amazon’s long-term opportunities—particularly its advances in AI and cloud computing—rather than any short-term price jumps. With consumer data pointing to a strong holiday season for e-commerce, Amazon has reason for optimism as it heads into the new year.

Whether Amazon can maintain its dominance in the face of fierce competition and technological upheaval remains to be seen. But with a track record of reinvention and a willingness to bet big on the future, the company is unlikely to stand still for long.