Amazon (AMZN 1.47%), the world's largest e-commerce and cloud infrastructure company, has been an outstanding growth stock for long-term investors. Over the past decade, its stock has rallied nearly 590%, outperforming the S&P 500's advance of about 240%.
From 2014 to 2024, Amazon's revenue grew at a CAGR of 22% -- even as the pandemic, inflation, high interest rates, and other macro headwinds rattled the global economy. From 2024 to 2027, analysts expect its revenue and earnings per share (EPS) to grow at a CAGR of 11% and 20%, respectively, as its e-commerce and cloud businesses continue to expand.
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Amazon's stock looks reasonably valued at 29 times next year's earnings, even as the S&P 500 hovers near its all-time high. I believe it's still a rock-solid investment, but investors should be aware of these three key things about the company before making a decision.
NASDAQ: AMZN
Key Data Points
1. AWS is its core profit engine
Amazon generates most of its revenue from its e-commerce business, but its profits primarily come from Amazon Web Services (AWS), its cloud infrastructure platform. In the first nine months of 2025, AWS generated 18% of its net sales and 60% of its operating profit. Here's how rapidly that core profit engine grew over the past few years.
|
Metric |
2022 |
2023 |
2024 |
9M 2025 |
|---|---|---|---|---|
|
AWS Net Sales Growth (YOY) |
29% |
13% |
19% |
18% |
|
AWS Operating Margin |
28.5% |
27.1% |
37% |
35.6% |
|
AWS Operating Income Growth (YOY) |
23% |
8% |
62% |
16% |
Data source: Amazon. YOY = Year-over-year.
The rapid expansion of the artificial intelligence (AI) market is driving that growth as more companies upgrade their cloud infrastructure to handle the latest AI applications. AWS has also been rolling out more tools for developing and deploying agentic AI applications.
AWS operates at higher margins than other smaller cloud platforms -- including Microsoft (MSFT 0.48%) Azure and Alphabet's (GOOG 1.49%) (GOOGL 1.45%) Google Cloud -- because it's the entrenched market leader with superior scale and pricing power. According to Canalys, AWS controlled 32% of the global cloud infrastructure market in the second quarter of 2025, while Azure and Google Cloud held 22% and 11% shares, respectively.
2. Its advertising business is booming
Amazon isn't typically considered an advertising company, but it generates significant ad revenues from its promoted listings, integrated display ads, and streaming media ads. In 2024, its advertising service revenue increased 20% to $56.2 billion, accounting for 9% of its top line.
In the first nine months of 2025, its advertising service revenue increased by 22% year-over-year to $47.3 billion, accounting for 9% of its top line. It doesn't break out the segment's operating profits separately, but it likely operates at higher margins than its retail business.
Therefore, Amazon's advertising business -- which could easily surpass $60 billion in revenues this year -- will likely become its second profit engine alongside AWS. It's also well-poised to challenge Google's and Meta Platforms' (META 2.48%) dominance of that booming market.
3. Its Prime ecosystem is expanding
Amazon's rising cloud and advertising profits enable it to expand its e-commerce business with lower-margin and loss-leading strategies. The bedrock of that expansion is its Prime ecosystem, which has locked in more than 240 million paid members worldwide.
By offering more discounts, free shipping options, cloud storage tools, streaming media services, and other benefits to its Prime members, Amazon enhances the stickiness of its e-commerce marketplace and widens its moat against other retailers. As long as its cloud and advertising businesses continue to grow, it can afford to take some losses to gain more members.
Is it the right time to buy Amazon's stock?
Amazon's growth will inevitably slow down as its business matures. However, it remains one of the most balanced plays in the secular expansion of the e-commerce, cloud, AI, and digital advertising markets. Its takeover of Whole Foods Market in 2017 also expanded its brick-and-mortar footprint and strengthened its online grocery business. It continues to expand its media businesses to challenge stand-alone streaming video and music companies. All of those long-term catalysts make it an excellent stock to buy, hold, and forget for a few decades.
