Investors have been getting more excited about Amazon (AMZN -0.98%) in the past month since the e-commerce and cloud-computing juggernaut announced that it will perform a 20-for-1 stock split on June 6.
Stock splits often intrigue investors because they result in a lower price per share, making it technically easier for a broader swath of individuals to buy the stock. But such events are less important these days as many brokerage accounts allow investors to buy fractional shares.
More importantly, while shareholders will wind up with more shares than they had before, the overall value of the company (and prior investors' stakes) will remain essentially the same.
Having said all of that, there are a couple of excellent reasons why you may want to buy Amazon stock this month that don't have anything to do with its stock-splitting plans.
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Amazon's lucrative lead in the cloud
Most people still think of Amazon first and foremost as an e-commerce giant, but the company's cloud computing business, Amazon Web Services (AWS), is where it makes its real money.
In 2021, an impressive 74% of its operating income came from AWS even though it generated just 13% of the company's total revenue. The cloud business isn't just immensely profitable for Amazon, it's also one of the company's fastest-growing segments with sales increasing 40% year over year in the fourth quarter to $17.8 billion.
All of that is impressive enough, but the company's opportunity looks even better when you consider that AWS currently holds 33% of the cloud infrastructure market, amounting to $191.7 billion. Microsoft is the runner-up with a market share of 22%, while Alphabet lags them both with 9%.
In short, AWS is growing quickly, is very profitable, and is the dominant player in cloud computing -- which all points to the company's long-term potential to continue benefiting from this market.
Advertising is the icing on the revenue cake
Amazon disclosed its advertising revenue as a separate metric for the first time when it reported its fourth-quarter results back in February -- and investors really liked what they saw.
The company's ad sales totaled $9.7 billion in the quarter, up 32% from 2020. To put that in perspective, Amazon's advertising business is officially bigger than YouTube's ad segment, which totaled $8.6 billion over the same period.
Prior to the most recent report, analysts and investors had to make due estimating what the company's ad sales were, but now they've got a clear picture of a healthy business that's generating tons of revenue and growing quickly. According to eMarketer, Amazon's advertising business will continue cutting into the market shares of Alphabet and Meta Platforms in the coming years, and account for nearly 15% of the digital ad market by 2023 -- up from less than 12% last year.
Keep this in mind
While some investors may be getting excited about Amazon right now because of the upcoming stock split, its strong positions in advertising and cloud computing are far better reasons to consider buying the stock this month.
