Amazon.com (NASDAQ: AMZN) is a remarkable firm that dominates two distinct industries. AWS outperforms the other main cloud platforms, and its e-commerce platform is larger than its following 10 competitors.
My colleague Sean Williams noted in a recent report that eight billionaires, including Citadel's Ken Griffin, bought Amazon shares in Q4 2023. Even Warren Buffett's Berkshire Hathaway and billionaires David Tepper and Stanley Druckenmiller own Amazon shares.
Amazon has many positives, but I wouldn't buy a stock just because billionaires are purchasing it. I've added shares to my portfolio multiple times in recent years, and I think patient investors will benefit from this impressive company. Amazon's last earnings report was strong. It surpassed top and bottom line predictions, and CEO Andy Jassy's focus on efficiency increased net income to $10.6 billion from $278 million in the fourth quarter of 2022. Strong Christmas sales boosted revenue 14% year over year.
Amazon expanded well overall. AWS growth accelerated by 1 percentage point sequentially, while North America and foreign e-commerce sales rose 13% and 17%, respectively. While approximately 85% of Amazon's revenue comes from e-commerce, AWS generates most of its operating profitability. Advertising revenue rose 27% year over year in the fourth quarter, demonstrating its high-margin nature. Additionally, Amazon began placing adverts on Prime Video content in January, so this may develop significantly.
Amazon's company might develop significantly on both sides. Amazon operates in several international regions where e-commerce accounts for even less than 15% of retail sales. The advertising industry has long-term growth potential. AWS expects the worldwide cloud computing industry to double from 2023 levels by the end of the decade, reaching $2.4 trillion.
AWS may benefit as generative AI technology advances. Management claimed AWS' generative AI products, such its "Q" chatbot for enterprises, are popular, and Jassy said AI could generate "tens of billions of dollars" in revenue over the next five years. Amazon makes AI processors and a platform for AI apps.
Amazon's growth potential isn't the only thing. It has room to boost efficiency and margins, notably in e-commerce. Amazon's logistics network efficiency gains and quick advertising development should help. Jassy prioritises efficiency.
One of the "Magnificent 7" firms, Amazon has a $1.8 trillion market cap and is one of the world's largest. However, if it can capitalize on its growth and profitability potential, Amazon might double or triple in size by the end of the decade. Amazon could become the first $5 trillion firm, yet much could happen.
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