Did you know that there is a small segment that Amazon (AMZN -0.46%) reports that's growing faster than all of its others, including Amazon Web Services (AWS) and even the lucrative advertising segment? It accounted for less than 1% of total sales in the 2023 second quarter, which is why you might shrug it off as not important.

But it is. What is this mysterious weapon that I speak of? Read on.

Amazon's incubator

These days, Amazon breaks out its revenue into seven categories. These include businesses you know about, such as online sales and AWS. But the last category it reports is called "other." This is a fluid segment, and as such, its sales growth rate has fluctuated depending on what's included. But its growth rate has typically been significantly higher than the company's total revenue growth rate.

Metric Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023
Total sales growth 27% 15% 9% 7% 7% 15% 9% 9% 11%
"Other" segment sales growth 87% 50% 18% 28% 131% 163% 77% 55% 26%

Data source: Amazon quarterly reports. All growth percentages are year over year.

Prior to 2021's fourth quarter, the other segment was defined as primarily including "Sales of advertising services, as well as sales related to our other service offerings."

Amazon finally started breaking out ad sales into their own separate category in Q4 2021, when they increased 32% year over year. The other category remained, but with a definition that became more nebulous -- "Sales related to various other service offerings." Notice that the growth rate decelerated in that quarter. However, even without ad sales included, it still outpaced the company's total growth rate.

Starting in Q2 2022, the other category was redefined as "sales related to various other offerings, such as certain licensing and distribution of video content and shipping services, and our co-branded credit card agreements," and it rocketed ahead at a triple-digit percentage rate. That may have been a result of Amazon launching Buy With Prime and expanding its fulfillment network, increasing sales for its shipping services. Since then, it has been the company's fastest-growing category.

The newest change happened in Q1 2023 with the launch of One Medical. Now, the other category is defined as "Sales related to various other offerings, such as certain licensing and distribution of video content, healthcare services, and shipping services, and our co-branded credit card agreements." But as mentioned above, it still only accounts for a tiny fraction of total sales.

Why should investors care?

You probably already see where this is going. Ad sales were always growing faster than total sales, but advertising as an Amazon business mostly came onto investors' radars after it became a separate reporting segment. Management folds together many of its smaller businesses into the other category. Although it's mostly vague in its definition of what goes in there, it can give investors some clues as to what the company's next big growth driver might be.

Today, the umbrella category of "other" covers video licensing and distribution, shipping, healthcare, and co-branded credit cards. Management hasn't given too many details about most of these ventures, which makes sense, considering how many details it provides about its larger businesses. 

I can imagine healthcare turning into the next big thing, but in its latest earnings report, management only gave investors a peek into how the One Medical rollout is going. On the second-quarter conference call, CFO Brian Olsavsky said that Amazon is "encouraged by what we're seeing there," and he noted that the company had only been in the healthcare business for a short time. One optimistic update was that Amazon Pharmacy had doubled the number of active customers year over year.

Just to note, not all of the company's smaller ventures are included in "other." If they're closely related to e-commerce or AWS, their results will be included in those segments. 

Pay attention

The "other" category accounted for just over $1 billion in revenue in Q2 2023, which is significant in the abstract, but fades when compared with Amazon's $134 billion total. It's worth keeping an eye on, though, as it adds new businesses and reliably generates the company's highest growth rates overall.