Amazon (AMZN -0.14%) has been on fire since it reported blowout earnings just a week ago. The stock has risen about 18%, which may make investors feel like they've missed the boat on Amazon's stock. However, Chief Executive Officer Andy Jassy made a stunning projection that makes the 18% rise look like small potatoes compared to what's ahead.
This has huge implications for the company and could lead to Amazon being worth more than $15 trillion someday. For reference, it just broke the $3 trillion market cap threshold following its surge.
Amazon CEO Andy Jassy. Image source: Amazon.com Inc.
AWS is lighting it up
Amazon may be known to most people as a e-commerce business, but in the investing world, it's a cloud computing business. Amazon Web Services (AWS) accounts for the majority of Amazon's operating profit, totaling 60% in Q2. That makes it Amazon's most important division, and ensuring its success is Jassy's primary goal.
AWS is the world's largest cloud computing service and has risen to that position through a combination of being the first company to offer cloud computing services and delivering a great product. It has several big-name companies as clients, along with leaders in the artificial intelligence (AI) realm, such as Anthropic, the maker of the Claude generative AI model.
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Key Data Points
Demand for AI computing resources has exploded, and a cloud computing service like AWS is a great way for companies to access the AI computing power they need. This is why Amazon's 2026 capital expenditures will be $220 billion, as it sees enough demand to warrant spending all of its free cash flow, and then some. This appears to be panning out, as AWS posted a jaw-dropping 37% growth rate -- the best in years. As more computing capacity comes online from the hundreds of billions of dollars that Amazon is spending, this growth rate will remain elevated, pushing AWS to new heights.
What's even more impressive is the long-term demand for computing resources. Jassy noted that Amazon will not have enough computing capacity to meet demand in 2026 and that the shortage is also expected to last into 2027. As a result, the company is already seeing demand for 2028 computing pop up. That's about as robust as an investor can ask for, and justifies Amazon's huge spending bill.
This will lead to a growing business, and Jassy now believes that AWS could become a $1 trillion annual revenue business. For reference, AWS has generated about $150 billion in revenue during the past 12 months.
So what does that mean for Amazon? This could be the boost it needs to become a $15 trillion business, or greater.
A $1 trillion AWS business equates to huge stock performance
During Q2, AWS put up a 39% operating margin. If we apply that to AWS's hypothetical $1 trillion annual revenue someday, it would equate to $393 billion in operating income. For reference, Amazon generated $93.7 billion in operating income companywide during the past 12 months, with $54.7 billion of that coming from AWS. If we assume Amazon's other businesses can double in the same time that it takes AWS to reach the $1 trillion annual revenue mark, that would give its non-AWS businesses $78 billion in operating income.
Added together, that's $471 billion in operating income, a 403% rise from today's levels. If Amazon could maintain today's valuation and deliver that level of growth, it would be a $15 trillion market cap company. That's a huge gain from today's levels, and if the company can sustain this growth during the next decade, it would become one of the market's best-performing stocks, making Amazon a must-buy now.
