Amazon Continues to Be a Strong Investment Despite Challenges
If you invested in Amazon (NASDAQ: AMZN) at the start of any year over the past two decades, your investment would have grown five years later, every time. This trend holds even for more recent investments. For instance, if you invested at the beginning of 2024, you’d be seeing gains now, despite the stock having declined over 20% from its peak.
Historically, betting against this retail and cloud-computing powerhouse has proven unwise. Still, some investors are currently taking a contrarian stance as economic uncertainties loom.
Long-Term Promises for Amazon
Many experts believe Amazon Stock remains a solid long-term investment for those who can overlook short-term fluctuations.
What Drives Amazon’s Returns?
Amazon’s retail operations are extensive and complex. In the first quarter of 2025, net sales from online stores, physical locations, and third-party seller services reached nearly $100 billion. This retail segment accounted for 64% of Amazon’s business during that quarter, highlighting its central role in the company’s operations. With its vast customer base and logistics network, Amazon is well-positioned against potential disruptors.
Image source: Amazon.
Yet, challenges exist. Tariff uncertainties are impacting the market, and CEO Andy Jassy acknowledged the lack of clarity around their future implications. However, these developments affect the entire industry, suggesting Amazon’s competitive position remains intact compared to its rivals.
Investors can thus expect Amazon to maintain its course, with its stable retail business underpinning prospects for shareholder value growth in the coming years.
Potential Growth from AWS
Looking ahead, Amazon Web Services (AWS) is set to be a major driver of shareholder returns. AWS has generated $112 billion in net sales over the last year, and its growth is far from stagnating; it increased by 17% in the first quarter alone.
Jassy notes that only 15% of global IT spending currently goes to cloud computing, with projections suggesting this could rise to 85% in the next two decades. As a leading player in the cloud space, AWS is poised for significant expansion.
Additionally, Amazon’s advancements in artificial intelligence (AI) are accelerating growth. The AI sector is currently expanding at over 100% annually and already generating substantial revenue. If AI were a standalone entity, it would likely be a focal point for many investors, illustrating its importance in Amazon’s broader portfolio.
In summary, Amazon’s retail business remains resilient despite tariff risks, while AWS holds substantial promise for future growth. This combination is vital when evaluating Stock performance. AWS is particularly profitable: it delivered nearly 40% operating margin in the first quarter and contributed 63% of the company’s total operating income. Given that AWS requires minimal top-line growth to significantly enhance overall profitability, Amazon’s future looks promising as IT spending shifts to the cloud.
While immediate results may not materialize in 2025, there are strong indications that Amazon’s profits will be significantly higher in five years, potentially driving its Stock upward. Therefore, it remains a compelling long-term buy.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
