Amazon Leverages AWS Growth Amidst E-Commerce Stagnation

Amazon's stock potential is buoyed by its cloud computing segment AWS, which shows robust revenue growth despite declining e-commerce performance. Investors should focus on profits driven by AWS for a clearer picture of Amazon's future.

Date: 18-05-2025

AI Rating: 8

Amazon's Earnings Picture
Amazon (NASDAQ: AMZN) is at a pivotal point where its cloud computing division, AWS (Amazon Web Services), is becoming the cornerstone of its profitability. The recent report shows that AWS, despite accounting for only 19% of Amazon's total revenue, generated an impressive 39% operating margin.

This sharp contrast with the North American segment, which only yielded a 6.3% operating margin, illuminates why AWS should be of keen interest to investors. Operating profits driven by AWS accounted for a staggering 63% of Amazon’s total operating profits during Q1, underscoring the cloud division's critical role.

Growth Trends and Revenue Insights
While the retail side of Amazon continues to grow, with an annual increase of 8%, it’s clear that AWS’s 17% revenue rise outpaces this growth. Investors should note that the focus is shifting towards profit margins rather than merely top-line growth, as AWS is expected to continue propelling earnings higher due to the ongoing cloud migration and increased demand for AI workloads.

Despite a slight slowdown in operating income growth over recent quarters, keeping it in double digits is encouraging and suggests that Amazon retains robust financial health. Enthusiasm for cloud computing shows no signs of abating, with forecasts estimating the market will expand from $750 billion in 2024 to a staggering $2.3 trillion by 2030.

AWS has positioned itself as a leader in this booming sector, which serves as a major growth catalyst for Amazon’s stock. Investors should prioritize monitoring AWS’s performance metrics, particularly operating profits, for a clearer guide on Amazon’s overall value trajectory.

Stocks: AMZN