Key Points
The market has been rallying, with several popular stocks hitting all-time highs in recent weeks. While this doesn’t mean these stocks will continue to go up in a straight line, let’s look at two with continued strong long-term potential.
1. Amazon
Amazon (NASDAQ: AMZN) recently hit an all-time high following its strong Q2 2026 earnings report, and the stock looks well-positioned to be a long-term winner. The company is the market share leader in both cloud computing and e-commerce, and both businesses are firing on all cylinders.
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Amazon’s most profitable business is cloud computing unit Amazon Web Services (AWS). Amazon created the entire cloud industry, and it remains the largest cloud provider today. Cloud computing is currently being driven by surging demand for artificial intelligence (AI) infrastructure, and AWS has seen its growth start to accelerate nicely. Last quarter, AWS revenue surged 37% to $42.2 billion.
Demand continues to outpace capacity, and Amazon is spending aggressively to expand. It has a $496 billion backlog backed by partnerships with leading frontier model companies Anthropic and OpenAI. CEO Andy Jassy, meanwhile, recently predicted that this could become a $1 trillion revenue business, while noting that the company breaks even on its chip and networking investments within two to three years. With five-year contracts and five-to-six-year lifespans for this equipment, Amazon is getting a strong return on its investment.
One of Amazon’s advantages in its cloud business is its custom chips, including Trainium AI accelerators and Graviton central processing units (CPUs). This has recently become a $25 billion revenue-run-rate business, while it also uses these chips internally to help reduce build-out and inference costs. This is one of the reasons the company saw strong operating leverage last quarter, with AWS operating income soaring 63% to $16.6 billion.
In addition to its strong cloud computing business, Amazon’s e-commerce business continues to perform well, with North American revenue up 16% and international revenue up 15%. Meanwhile, the company continues to see strong operating leverage, given the efficiency improvements it has seen from its investments in robotics, where it is the world’s largest manufacturer and operator, and AI.
Also not to be overlooked, Amazon has become one of the world’s premier digital advertisers. This high-margin business grew 26% to $19.8 billion last quarter.
Despite its stock recently hitting an all-time high, Amazon trades at a forward price-to-earnings (P/E) ratio of just 23 times, which is both a historically attractive valuation and a bargain compared to some of its brick-and-mortar peers like Costco and Walmart.
Image source: The Motley Fool.
2. Apple
Another stock that continues to have a bright future is Apple (NASDAQ: AAPL). Apple hit its all-time high before its fiscal Q3 2026 earnings report and then fell back due to a combination of service revenue and China coming up short of expectations, as well as worries over the impact of high memory prices.
The miss in service revenue looks to be largely because of currency headwinds rather than any weakness in this business, which historically tends to grow in the mid-teens range. And for long-term investors, the biggest reason to own the stock is the company’s service business.
Apple’s tightly integrated hardware and walled-garden ecosystem lead to high customer retention, which directly feeds into its high-margin services business. This ecosystem allows Apple to monetize its user base through things like its Alphabet search deal, cloud storage, Apple Pay, and its commission on app sales and subscriptions. Ultimately, this creates a flywheel effect that gives Apple one of the best compounding businesses in the world today.
While the stock is not cheap, with a forward P/E of 32 times fiscal 2027 estimates (ending June 2027), Apple’s position as the top high-end smartphone maker and its compounding business model make it a long-term winner. Meanwhile, worries over China, which did see strong growth, and memory prices look like temporary headwinds.
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Geoffrey Seiler has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
