Amazon (NASDAQ: AMZN) isn’t the first company you think of when you hear “big tech.” Its commerce platform dominates the minds of most consumers, but now that it’s mostly mature, it’s really not that great of a business to be invested in from a growth standpoint.
Instead, its cloud computing business, Amazon Web Services (AWS), is a far more compelling reason
AWS has some major growth tailwinds thanks to unprecedented artificial intelligence (AI) spending, and it has an unlikely revenue stream in that segment that could lead to the stock producing market-crushing returns over the next few years. Amazon is more of a cloud computing company than a commerce company First, investors need to understand why Amazon is more cloud-focused than commerce-focused. During Q1, 57% of revenue came from North American commerce and 22% came from International, leaving 21% for AWS.
That may sound like a counterargument, but that’s not what investors care about. Commerce businesses have notoriously thin margins, and investors care more about profits than revenue. During Q1, AWS accounted for 59% of Amazon’s operating profits — a trend that has persisted over the past year.