Amazon, the e-commerce powerhouse, is poised to maintain growth in the foreseeable future. The stock value of the company which was languishing at a multi-year low of approximately $84 early in 2023 got a significant boost, doubling up to $200. This remarkable elevation is attributed massively to their boosted financial performance. While the company surfs on the positive currents such as artificial intelligence (AI) related developments, it also grapples with challenges like the e-commerce industry’s slowdown, which poses questions for investors considering Amazon stocks.
The year 2024 served to be a lucrative period for Amazon, as evidenced by their robust performance. The firm increased its revenue source by 11%, growing it to $638 billion with all three significant segments experiencing this growth. The company witnessed an upsurge of 10% in North America, 9% internationally, and a whopping 19% rise in their Amazon Web Services (AWS). The operating profit saw an 86% leap from $36.9 billion to $68.6 billion, reflecting an escalation of profit throughout all divisions.
Amazon’s proficient skillset and commanding understanding of controlling its expenses and using operating leverage to its advantage have led to this steep rise in operating profit. This transformative period also saw Amazon consistently accelerating its delivery speeds and rolling out Amazon Haul, a brand-new, ultra-low priced shopping service established in the U.S., with the intent to compete against inexpensive competitors like Temu and Shein.
In the year 2024, Amazon achieved significant milestones in its cloud computing services – AWS. The company came up with innovative features that offer end-users considerable flexibility and financial savings. This development helped Amazon to solidify its competitive stature in the ongoing AI and cloud computing race.
While Amazon’s identity is rooted strongly in its e-commerce business, the anticipated growth dynamos over the next few years are expected from different segments. Particularly, AWS is predicted to gain significant ground, leveraging mega trends such as ongoing cloud migration and advancements in AI. The global AI industry, currently valued at $294 billion in 2024, is anticipated to expand to $1.772 billion by 2032, with an average annual growth rate of 29%.
Propelled by an impressive 30% global market share, AWS seems well-positioned to reap the benefits of this trend. Another area where Amazon is set to gain momentum is its advertising venture. This sector generated a tidy sum of $14 billion during the first quarter of 2025, a yearly growth rate of 18%. Given the high margin nature of the advertising business, this segment will notably contribute to Amazon’s profit margin expansion over time.
The prospects of Amazon’s e-commerce segment in the forthcoming years seem mixed. The company is determined to capitalize on its remarkable scale, outperform traditional physical stores, and tap into emerging markets such as India. However, it grapples with potential headwinds like the uncertainties surrounding import duties and the rise of competitors like Temu and Shein.
Amazon is resolute in its commitment to the ‘Day 1’ philosophy, which emphasizes customer dependency, experimentation, and acceptance of failures, positioning it for continued growth despite the possible hurdles. Thus, the company’s continued growth seems convincingly plausible in the upcoming years.
Investors need to reflect on Amazon’s stock valuation as well. Over the past five years, the stock’s price-to-sales (P/S) ratio has ranged from 1.7 to 4.6 times. As of now, it sits at 3.3 times, which is commendably at the midpoint of this range. While it certainly doesn’t scream bargain at the current rate, it isn’t excessively valued when compared to historical pricing.
To sum up, the year 2024 has been an impressive testimony to Amazon’s execution of strategies resulting in robust results. The potential growth propellers for Amazon’s future success, the high margin AWS and advertising segments, are primed for success due to trends such as increasing adoption of AI.
E-commerce, nonetheless, will likely see mixed results due to numerous variables. However, the commitment to its Day 1 culture is expected to fuel Amazon’s competitive edge for quite some time. Terminal investors might consider maintaining their hold on the stock, and those with a long-term investment perspective can contemplate purchasing a modest position, gradually building it over time.