Consumers were increasingly turning to e-commerce before the coronavirus pandemic, but the trend was supercharged in 2021 when the global market grew to over $4.9 trillion. Similarly, global cloud infrastructure spending has skyrocketed, which will likely continue as adoption rates and data needs expand. 

Amazon (AMZN 0.83%) is a dominant global force in both industries. In fact, the company claims a 33% market share in global cloud infrastructure and 41% of the U.S. e-commerce market. With this as a backdrop, the short-term dip in Amazon stock seems like a terrific opportunity for long-term investors.

A cardboard box exchanging hands.

Image source: Getty Images.

Q1 results reflect expected struggles

The challenges in the labor, logistics, and materials markets have been well reported. Amazon spent billions of dollars shoring up its workforce through hiring, bonuses, and raised wages in recent periods. Logistics challenges and rising prices for materials have also cut into the bottom line significantly. Because of these added costs, operating income in the North America and international segments, encompassing e-commerce results, posted significant losses in the first quarter. 

While this is undoubtedly concerning, it was entirely expected. There was no Q1 surprise for anyone who has been paying attention. I have mentioned in several articles that the e-commerce headwinds are likely to last for at least the first half of 2022. Here's the good news: While painful, these headwinds are short-term obstacles.

Another point of consternation was the $7.6 billion loss from Amazon's equity investment in electric vehicle maker Rivian Automotive (RIVN 0.27%). Again, this was expected as Rivian stock has not performed well. The loss is unrealized and will reverse if Rivian stock rebounds. Amazon currently owns 18% of Rivian and is expected to be its largest customer. When Rivian ramps up production, Amazon will be able to purchase a fleet of electric delivery vehicles from a company in which it owns 18% of the profits -- not a bad deal.

Amazon Web Services to the rescue

As much as margins and operating income have suffered in e-commerce, they have exploded in the Amazon Web Services (AWS) segment. Amazon is years ahead of cloud competitors like Alphabet's Google Cloud.  

AWS is highly profitable. Lost in the sauce of Q1 results was a rise in the segment's operating margin to a massive 35%. By contrast, the Google Cloud segment is a money loser for Alphabet. The chart below juxtaposes the operating margins of the two cloud businesses.

Cloud operating margins for Alphabet and Amazon

Data sources: Alphabet, Amazon. Chart by author.

To put it another way, while Alphabet has lost money each period in the graph above, Amazon has pocketed $47.8 billion in operating profits from AWS. Not too shabby. 

Is now a good time to buy Amazon stock?

Amazon is set to split its stock 20-to-1 in June. While this does not directly affect shares' underlying value, investors often have increased interest around a stock split. The split will also make Amazon a candidate for potential inclusion in the Dow Jones Industrial Average. The stock isn't a candidate now due to how the Dow is calculated. Dow inclusion means funds that follow the index would consistently buy Amazon stock, creating significant demand. There is no concrete indication that Amazon will join the Dow, but the split makes it possible.

Amazon stock may not have bottomed yet. The short-term price is partially reflective of the overall market and economy. On the other hand, the market can come screaming back at the drop of a hat. Luckily, long-term investors do not have to buy at the exact bottom to make tremendous profits over time. Amazon now trades nearly 40% down from its 52-week high and is more than 30% down year to date. Analysts and headlines seem increasingly negative, which may signal that now is a savvy time to increase our holdings. As Warren Buffet advises: "Be greedy when others are fearful."