E-Commerce Giants Navigate Headwinds: Why Amazon and Expedia Still Look Compelling

The Real Story Behind E-Commerce Growth

Contrary to broader market pessimism, the digital retail sector is quietly outpacing traditional commerce. The latest Commerce Department data reveals e-commerce sales jumped 5.1% year-over-year in Q3 2025, significantly outstripping the 4.1% growth in overall retail. This translates to e-commerce now commanding 16.4% of total U.S. retail sales—and the momentum shows no signs of slowing despite macroeconomic headwinds.

What’s particularly noteworthy is the continued blurring of digital and physical retail boundaries. Consumers no longer think in terms of “online” versus “offline”—they seamlessly blend both. This structural shift is creating a winner-takes-most dynamic, where only retailers capable of competing across both channels will survive tomorrow’s landscape.

Why AI Is Reshaping Consumer Behavior

Artificial intelligence has moved from novelty to necessity in driving e-commerce expansion. The recent Adobe Analytics study, which analyzed over 1 trillion retail site visits covering 100 million products, showed holiday season e-commerce sales climbing 6.1% through mid-December. Even more revealing: customer returns fell 2.5%, suggesting shoppers are becoming more deliberate in their purchases—likely leveraging AI-powered recommendation tools to make smarter buying decisions.

This AI acceleration extends beyond simple search. “Agentic commerce” powered by large language models now actively recommends products, compares specifications and completes transactions with minimal user intervention. Adobe projects AI-driven traffic to retail sites will surge 515-520% compared to 2024’s holiday season, with November witnessing an extraordinary 758% spike.

The Emergence of Social and Subscription Commerce

Gen-Z is pioneering a retail renaissance through social platforms. Remarkably, 46% of Gen-Z consumers now initiate product discovery on TikTok rather than Google or Amazon, according to eMarketer data. Instagram and YouTube are optimizing in-app checkout functionality, enabling frictionless purchasing without leaving users’ feeds.

Simultaneously, subscription models for repeat-purchase items continue gaining traction. This format benefits both consumers—through discount incentives—and retailers, who gain predictable revenue streams and enhanced customer loyalty insights. As businesses increasingly adopt “as-a-service” delivery models for both tangible and intangible goods, this trend is poised to expand significantly.

Industry Strength Amid Mixed Signals

The Zacks Internet-Commerce Industry carries a #79 ranking among 243 sectors, placing it in the top 33%—a meaningful vote of confidence. Historically, top-performing Zacks industries outpace lower-ranked peers by a 2-to-1 margin. However, analyst estimate revisions tell a cautionary tale: 2025 earnings estimates are down 5.5%, while 2026 projections have declined 7.1%, reflecting lingering concerns about consumer discretionary spending.

Stock performance has lagged broader benchmarks. Over the past 12 months, e-commerce stocks gained just 4.2%, trailing the S&P 500’s 15.8% advance. Valuation appears reasonable, though: the industry’s forward price-to-earnings ratio of 24.03X represents only a 3.1% premium to the S&P 500 and sits below the sector’s historical median of 24.48X.

Amazon: Scale, Data and AI Dominance

Amazon’s moat extends far beyond retail. Its sprawling physical footprint—anchored by Whole Foods Market—addresses consumer demand for immediate gratification. But the real competitive advantage lies elsewhere: AWS’s commanding market position in cloud infrastructure generates outsized profitability while subsidizing aggressive e-commerce pricing.

The company’s AI capabilities, bolstered by massive data reserves, are creating unprecedented operational efficiencies. A 14,000-person workforce reduction announced this year reflects not business contraction but technological displacement—AI and automation are eliminating redundant management layers, enabling the retail juggernaut to operate with startup-like agility.

Recent FTC settlements requiring Amazon to simplify Prime cancellation processes and provide $2.5 billion in restitution represent governance headwinds. Yet analysts remain constructive: 2025 projects 11.9% revenue growth and 29.7% earnings expansion, with 2026 showing continued double-digit advancement. Amazon’s historical track record is formidable—exceeding earnings estimates by an average of 22.5% over the past four quarters. At current levels, Zacks assigns the stock a #2 “Buy” rating.

Expedia: Corporate Travel Tailwinds

Expedia’s diversified booking model—spanning leisure travel, corporate management services and B2B solutions—is driving outsized growth. Most compelling: B2B revenues surged 26% last quarter, outpacing overall 12% gross booking growth. This acceleration reflects structural corporate travel trends: increased conference attendance, in-person client engagement and employee upskilling initiatives as organizations prepare for AI-driven workforce transformation.

Management’s dividend reinstatement after the pandemic pause signals confidence in normalized cash flow generation. Analyst enthusiasm is palpable: 2025 estimates have climbed $0.96 (6.8% increase) and 2026 projections rose $1.54 (9.2% improvement) over the past 60 days. The consensus now models 6.7% revenue expansion and 24.6% earnings growth for 2025, with 2026 showing moderation to 6.3% and 20.8% respectively. Zacks rates this #1 “Strong Buy,” reflecting near-term momentum potential.

Bottom Line: Selective Exposure Justified

While macroeconomic uncertainty persists—with Fed policy remaining cautiously restrictive and consumer confidence volatile—the e-commerce sector’s structural tailwinds remain intact. Digital retail’s relentless market share capture from traditional commerce, combined with AI-enabled productivity gains, suggests selective positioning in industry leaders remains warranted. Amazon and Expedia exemplify companies positioned to capitalize on these secular shifts, even if near-term sentiment remains tempered.