The Jensen Investment Team added Amazon.com (ticker: AMZN) to the Quality Growth Strategy with an initial weighting of 4%. As of November 30, 2025, the Strategy had 26 holdings.
November 2025
Company Overview
Amazon was founded in 1994 by Jeff Bezos and is headquartered in Seattle, Washington. The company’s current CEO is Andrew Jassy, and Amazon employs 1,578,000 employees across North America and internationally. Amazon is a global platform with unrivaled scale and leadership across three structurally advantaged businesses:
- e-Commerce: Amazon.com is the world’s largest online retailer, supported by one of the deepest logistics networks in the industry and a global membership base of ~270M Prime subscribers.
- Cloud: As the top hyperscale cloud provider, AWS serves as critical infrastructure for enterprises, startups, and governments, with durable advantages in scale, breadth of services, and customer trust.
- Retail advertising: Amazon is the #3 global digital advertising platform, monetizing a massive ecosystem of active sellers and buyers with high purchase intent and customer trust, leveraging proprietary first-party data.
Amazon’s mission is distinctive, reflecting a culture shaped since its founding: to be “Earth’s most customer-centric company.” The company’s consumer focus is exhibited in their online and physical stores’ abundant selection, competitive prices, and unrivaled convenience.
Why We Like Amazon
Our thesis for Amazon.com (“Amazon”) is driven by their strong business fundamentals’ alignment with key tenets of the Jensen Quality Growth Strategy’s investment selection process:
Competitive Advantages
- Network effects: Amazon’s eCommerce platform is a powerful two-sided marketplace supported by logistics, Prime loyalty, and data flywheel, creating compounding effects that are hard to replicate. Amazon Web Services (“AWS”) operates a vertically integrated hardware and software stack with a strong developer community, broad partner network, and industry-specific expertise.
- Scale with cost advantage and high barriers to entry: In eCommerce, Amazon is double the combined scale of its second- and third-place competitors, Shopify and Walmart, respectively, with unique value adds for both consumers and sellers. In Cloud, AWS is roughly the same size as that segment’s second- and third-place competitors, Azure and Google Cloud, respectively.
- Brand and switching costs: Amazon is among the most trusted consumer brands globally. While traditional retailers have low switching costs, Amazon increases stickiness through Prime membership, comprehensive third party seller services, and AWS’s deep integration in enterprise workloads. AWS is considered the “safe choice” for enterprises’ mission-critical workloads.
Earnings Stability
- Amazon maintains a strong balance sheet with a net cash position, robust free cash flow generation, and stable-to-improving margins, all supporting higher long-term returns.
Valuation
- Amazon is traded at a discount from our long-term free cash flow-based model, especially given the company’s secular and high-quality growth opportunity.
Why Now
We have long admired Amazon’s deep moat, and the company has been a Strategy candidate since 2024. With its sustained elevated valuation, the company remained on our bench until recent volatility led to it trading at a discount relative to our model. Our decision to add the name reflects our assessment of its competitive-advantage trajectory, valuation, and risk profile.
Outlook
Although there is the possibility of near-term volatility, Amazon is an overall high-quality growth compounder. With long-term revenue growth of ~10% compound annual growth rate (CAGR) and returns on equity of ~24%, Amazon generates resilient free cash flow of ~20% CAGR. We believe its strong balance sheet with cash flow generation and improving margins all point to expected higher long-term growth.
Compound Annual Growth Rate (CAGR): The year-over-year growth rate of an investment over a specified period of time. The CAGR is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.
Free Cash Flow: Is equal to the cash from operations of a company less capital expenditures.
Return on Equity: Is equal to a company’s after-tax earnings (excluding non-recurring items) divided by its average stockholder equity for the year.
Strategy holdings are subject to change and should not be considered recommendations to buy or sell any security. Please click here for a listing of the Quality Growth Strategy’s current holdings.
The company discussion is solely intended to illustrate the application of our investment approach and is not to be considered a recommendation by Jensen. The specific security identified is taken from a representative accounts of the Jensen Quality Growth Strategy and does not represent all of the securities purchased and sold for the Strategy. Our views expressed herein are subject to change and should not be construed as a recommendation or offer to buy or sell any security and are not designed or intended as a basis or determination for making any investment decision for any security. Our discussions should not be construed as an indication that an investment in a security has been or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of any security discussed herein.
Certain information contained in this material represents or is based upon forward-looking statements, which can be identified by the use of terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of a client account may differ materially from those reflected or contemplated in such forward-looking statements.
This information is current as of the date of this material and is subject to change at any time, based on market and other conditions.
Jensen Investment Management, Inc., is an investment adviser registered under the Investment Advisers Act of 1940. Registration with the SEC does not imply any level of skill or training. Although taken from reliable sources, Jensen cannot guarantee the accuracy of the information received from third parties.
© 2025 Jensen Investment Management
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