Amazon might have begun sending books out of a small place, but now it’s making profit from every corner of the universe. Amazon’s $2.2 trillion market cap might give the appearance of a clumsy giant, as businesses that become so large generally grow at a slower pace due to a result of large numbers. Although it won’t double in a single day like a startup, Amazon isn’t finished surprising us. Its cloud segment is flourishing, its advertising arm is quietly making money, and it has got AI just like every other tech giant. Some believe that Amazon’s best growth days are behind, but when a company of this caliber continues to innovate like a startup, it’s difficult to put money against it.
Yes, Amazon’s core retailing business is expanding modestly, which is only 6% per year, and may not even be that profitable in its own right. This is not the whole truth though, that’s only part of the story. Its retailing business serves as a base for everything else, which is Prime memberships, digital advertising, and particularly AWS (Amazon Web Services). AWS alone accounted for almost $29 billion in Q1 revenue, increased 17% year-over-year, and contributed to Amazon’s operating income. Amazon’s cloud dominance provides it the audacity to double down on AI and emerging technologies. This could power the next phase of its growth story.
Amazon is doing just what it should do, which is playing upon its steady core businesses to pay for the future. The cloud and AI divisions are just like high value gold mines. However, outdoing the rest of the market may become more difficult unless it discovers new growth areas. With rivals such as Google, Microsoft, and even other cloud companies going after AWS, Amazon must remain tough and clever, or it might lose its competitive edge.
