Pershing Square Capital Management, led by Bill Ackman, executed a significant portfolio adjustment in the fourth quarter of 2025, divesting its stake in Alphabet to pivot towards increased investment in Amazon and a new position in Microsoft. This strategic realignment reflects Ackman's profound confidence in Amazon's future growth prospects, particularly its capacity for over 20% annual earnings expansion. The move solidifies Amazon's standing as a cornerstone of Pershing Square's portfolio, highlighting a deliberate focus on companies poised to capitalize on advancements in artificial intelligence and robust e-commerce trends.
The rationale behind Pershing Square's decision was publicly articulated by Ackman in a May 16, 2026, post, where he indicated the sale of Alphabet shares was primarily to free up capital for the Microsoft acquisition. However, the underlying conviction in Amazon's superior outlook is evident. Amazon's role as the fourth-largest holding in Pershing Square's reported assets, accounting for approximately 10% of the firm's total, underscores the magnitude of this belief, aligning perfectly with Ackman's initial investment thesis established in April 2025.
Central to Pershing Square's investment strategy for Amazon are its two primary growth engines: Amazon Web Services (AWS) and its vast e-commerce operations. Ackman's initial projections anticipated a surge in demand for artificial intelligence tools hosted on AWS, which he believed would reaccelerate growth for the cloud computing giant. These expectations have materialized, with AWS reporting a notable acceleration in revenue growth from 17% year-over-year in Q2 2025 to an impressive 37% in the most recent quarter, marking its fastest growth rate in over four years.
Furthermore, Amazon's overall financial performance has reinforced Ackman's thesis. The second quarter saw Amazon's total revenue climb by 20% compared to the previous year, while operating income experienced a substantial 43% increase, reaching $27 billion. This performance validates Ackman's assessment regarding the potential for margin expansion within Amazon's retail segment, driven by strategic investments in robotics and optimized inventory management, which have directly contributed to the observed growth in operating income. Continued momentum in advertising and ongoing automation in its warehouses are expected to further boost profitability.
Despite a modest reduction in its Amazon position during Q2, Pershing Square's long-term outlook remains decidedly bullish. This partial divestment was primarily to accommodate new investments in companies like Visa, Mastercard, S&P Global, and Netflix, rather than a shift in sentiment towards Amazon. Ackman maintains his expectation of Amazon achieving double-digit earnings growth exceeding 20% annually, a forecast consistent with broader Wall Street consensus. Given Amazon's trading multiple of approximately 22 times forward earnings, this valuation is considered reasonable for a company demonstrating such high growth potential, suggesting the stock could continue to deliver market-beating returns if these expectations are met.
The strategic move by Bill Ackman's Pershing Square to significantly increase its allocation to Amazon, while divesting from Alphabet, showcases a clear focus on high-growth technology sectors. This decision is underpinned by strong performance from Amazon's cloud computing division, AWS, and improvements in its e-commerce profitability, demonstrating the firm's commitment to investments poised for substantial long-term gains in evolving market landscapes.
