Amazon (AMZN 0.90%) ended 2024 on a high note, up 44% in 52 weeks. But more importantly, it's coming into the year with all systems go to leverage its e-commerce platform to gain market share and harness the power of artificial intelligence (AI) to supercharge its cloud platform.
2025 is starting off strong, but you should buy stocks that have long-term potential. Let's see where Amazon might be five years from now.
E-commerce: Gaining market share
Amazon has been steadily gaining market share in e-commerce over the past few years, and eMarketer expects it to have surpassed 40% of total U.S. e-commerce sales in 2024. It got a lot of competition from smaller companies that went online early in the pandemic, but it has improved its logistics networks and done a lot of other things to reinforce its top position and expand its lead.
It recently switched from a national to a regional warehouse system, and that's important as physical store chains use their physical footprint as a distribution channel. Both Walmart and Costco Wholesale are leveraging their many stores all over the country to ship orders quickly and cheaply, and they also have the advantage of being able to offer omnichannel options like store pickup that Amazon can't.
NASDAQ: AMZN
Key Data Points
Instead, Amazon is doing what it does best: offering the quickest and cheapest delivery options for online orders. The company is also adding tons of products to ensure that its Prime customers continue to rely on it for everything they need.
It keeps improving speed, which increases the chance that customers will keep using it for their everyday essentials and more, and it's also making efforts to cut costs. Same-day orders increased 25% year over year in the third quarter, and same-day deliveries are also one of its cheapest systems to operate. It recently piloted a new warehouse model in Louisiana that incorporates new robotics technology. It's already cutting processing time by 25%, which should drive a 25% improvement in costs.
In five years, Amazon should have even more of the e-commerce market, which itself is growing, generating organic growth opportunities. As it gets bigger, growth might slow down.
Cloud computing and AI: Accelerating sales
Amazon Web Services (AWS), Amazon's cloud computing division, accounts for 31% of the total global cloud market according to Statista. Second-place Microsoft Azure has 20%, and while its lead isn't as dramatic as in e-commerce, it's still hefty.
Clients who were budgeting when inflation skyrocketed are spending again, and more importantly, clients who want to get in on generative AI are flocking to AWS' platform.
That's because Amazon has developed an incredibly powerful AI business that offers all kinds of products and features to meet almost any demand. Management describes it as a three-tier system, with tools for developers to create their own large language models (LLM), its own Bedrock system for midsize enterprises to use Amazon's LLMs, and plug-in solutions for small business clients.
AWS sales growth accelerated in the third quarter to 19% year over year, and generative AI is already a billion-dollar business. However, CEO Andy Jassy thinks it's in its infancy and has massive long-term potential. On December's third-quarter earnings call, he said, "It is a really unusually large, maybe once-in-a-lifetime type of opportunity."
In five years, AWS should still be growing at a fast pace. It also accounts for most of Amazon's operating income -- 62% in the third quarter -- and it should help Amazon expand its margins.
Streaming: Staying competitive
Streaming isn't the first thing people usually think of when they think of Amazon, because Amazon is so much more. But it's still competitive in streaming, and it owns MGM Studios, providing it with first-rate content that rivals the other big players.
It has the rights to Thursday Night Football, and the Cowboys-Giants game in the third quarter was the most-streamed regular season football game ever. It also has highly rated series like The Lord of the Rings: The Rings of Power.
It recently rolled out an ad-supported tier like Netflix and Walt Disney, combined with a robust advertising business to generate new opportunities in the ad business.
In five years, Amazon should be able to stay competitive, adding new content, beefing up the ad part, and potentially making another acquisition.
Image source: Amazon.
Everything else
The ad business has been Amazon's fastest-growing operation for a while. Having access to Amazon's hundreds of millions of Prime members, who are all online to shop, is a huge benefit for advertisers. Amazon's data-rich, AI-based system also gives advertisers the tools to succeed.
Amazon is constantly acquiring new companies while launching new products and businesses to create more sales opportunities. It's investing in healthcare and its pharmacy business, and it's made several acquisitions over the past few years.
It recently acquired AI company Anthropic, and I expect that its coming rollouts and acquisitions will also be focused on growing the AI business.
What about Amazon stock?
Amazon stock beat the market in 2024, and it's well positioned to do it again this year. Even though it's already made millionaires, this company still has incredible growth prospects. It may not be the same as a young upstart, but it also comes with less risk. Amazon stock should amply reward investors over the next five years.
