This article was originally published on Nov. 25, 2014, and updated on July 22, 2017.

Back in 2007, Amazon (NASDAQ:AMZN) reported $14.9 billion in annual revenue. At the end of fiscal 2017, that figure is expected to hit $166.2 billion. During those ten years, Amazon evolved from an online retailer into a jack-of-all-trades across the consumer electronics, digital media, and cloud computing services markets.

These strategies put it in direct competition with other tech giants like Netflix (NASDAQ:NFLX) and Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google. It's often said that Amazon CEO Jeff Bezos thinks in "eons" instead of quarters. But since no one lives that long, let's take a more realistic look at Amazon's growth prospects over the next decade instead.

An Amazon Prime truck. Source: Amazon.

An Amazon Prime truck.

Amazon's defensive moat

With over 300 million customers worldwide, Amazon.com remains the 800-pound gorilla to beat in e-commerce. Amazon's consumer electronics (Kindle, Kindle Fire, Fire TV, Echo, and Dash appliances), streaming media (Prime Video), same-day delivery services all widen its moat. The crux of this long-term strategy is Amazon Prime, the $99 per year service which gives members product discounts, free two-day shipping, e-books, select media content, and other perks.

Amazon is leveraging its Prime user base -- which doubled to 80 million users in the U.S. over the past two years, according to research firm CIRP -- to ensure that rivals ike Google don't successfully expand into product searches and e-commerce. Amazon and Google are already clashing in home deliveries, media streaming, e-books, mobile apps, and cloud storage -- but the Prime ecosystem shields Amazon from Google's assault.

CIRP also reports that Prime members spend about $1,300, compared to just $700 for non-Prime members. Over the next decade, those numbers should continue rising as the Prime ecosystem expands, which should fuel stronger top line growth.

The growth of AWS

Amazon also owns AWS (Amazon Web Services) -- the largest cloud platform in the world. AWS' revenue rose 43% annually to $3.7 billion and accounted for 10% of the company's revenue last quarter. Its operating income rose 47% to $890 million, accounting for a whopping 89% of Amazon's operating profits.

A graphical representation of cloud computing.

Source: Getty.

The growth of that high-margin business offsets the weaker margins of its marketplace businesses, and lets Amazon to expand its Prime ecosystem with low-margin and loss-leading strategies. Wall Street expects that virtuous cycle to continue, respectively lifting its revenue and earnings by 22% and 36% this year. 

Overseas growth

Amazon's biggest market is North America, but it's aggressively expanding overseas. Amazon entered the Chinese market in 2004 via the acquisition of Joyo.com, but it remains a minor player in that market. Amazon also expanded into Brazil by launching the Kindle there in 2012, and it recently acquired Souq.com, the biggest e-tailer of the Middle East.

Amazon is also offering more original and localized Prime Video content in growing markets like Japan and India, which poses a threat to Netflix's overseas growth. The robust profit growth of AWS gives Amazon plenty of room to take losses on its international business to expand its ecosystem. The unit's revenue rose 16% annually to $11 billion last quarter, but its operating loss widened from $121 million to $481 million on those investments.

The next ten years

Amazon stock might look expensive at 91 times forward earnings. But looking ahead into the next decade, the company will likely keep dominating the retail and cloud spaces, making it tough for customers in both markets to escape its prisoner-taking ecosystem. Therefore, Amazon remains a solid long-term buy in my book.

 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Netflix. The Motley Fool has a disclosure policy.