I am sticking with the e-commerce and cloud chief as my high funding.
I invested in Amazon (AMZN -0.87%) in early 2016. I solely trimmed my place as soon as over the next 9 years, and people remaining shares now account for 9.1% of my portfolio. It is now my largest holding with an unrealized acquire of about 560%.
With the uncertainty about tariffs, rates of interest, and different macro headwinds rattling the markets, it’d look like the correct time to promote a couple of extra shares. Nonetheless, I am nonetheless not planning to prune my place in Amazon for 4 easy causes.
Picture supply: Getty Photos.
1. Its retail enterprise remains to be rising
Because the world’s largest e-commerce firm, Amazon hosts localized on-line marketplaces in over 20 international locations and provides worldwide delivery to greater than 100 international locations. Its paid Prime service — which gives reductions, free delivery choices, digital perks, and reductions at its Entire Meals Market shops — has locked in additional than 220 million subscribers worldwide.
Amazon’s retail enterprise is maturing, however its Prime ecosystem is extremely sticky, and it’ll proceed to tug buyers away from smaller retailers. In 2024, its on-line retailer gross sales rose 7% to $247 billion as its bodily retailer gross sales (Entire Meals and Amazon Go) grew 6% to $21.5 billion. Within the first quarter of 2025, its on-line and bodily retailer gross sales each elevated 6% yr over yr.
That secure development was pushed by the enlargement of its third-party market, investments in its logistics community that boosted its supply speeds, and its deployment of extra AI instruments to strengthen its buyer suggestions and operational efficiencies. These enhancements ought to widen its moat and generate long-term tailwinds for its retail enterprise.
2. Its cloud enterprise will revenue from the AI growth
Amazon generates most of its income from its retail enterprise, however most of its earnings come from Amazon Net Providers (AWS), the world’s largest cloud infrastructure platform. AWS managed 33% of the worldwide cloud infrastructure market on the finish of 2024, in keeping with Canalys.
Microsoft Azure ranked second with a 20% share, adopted by Alphabet‘s Google Cloud with an 11% share.
In 2024, AWS’ income rose 19% to $107.6 billion. Its working margin additionally expanded almost 10 proportion factors to 37%. That strong development signifies that its superior scale nonetheless offers it loads of pricing energy in opposition to its smaller rivals.
As the factitious intelligence (AI) market expands, extra corporations are ramping up their spending on AWS’ cloud infrastructure to retailer extra knowledge and deal with extra demanding AI functions. To handle these wants, Amazon is increasing its international knowledge heart footprint, creating its personal customized AI chips, and dealing with the AI start-up Anthropic to construct new generative AI functions. These irons within the hearth nonetheless make Amazon one of many easiest and most secure methods to revenue from the secular development of the general public cloud and AI markets.
3. Its promoting enterprise is increasing
Most traders acknowledge Amazon as an e-commerce and cloud firm, however its promoted listings, market adverts, and digital media adverts additionally make it an promoting big. In 2024, its promoting income rose 20% to $56.2 billion, or 9% of its high line. In line with WARC Media, that determine may develop at the least 7% to $60 billion, or 9% of its projected income, in 2025.
Amazon is now the third-largest digital promoting firm on the earth after Google and Meta Platforms, in keeping with Emarketer. That enterprise ought to proceed to thrive as extra web customers begin their product searches on Amazon as an alternative of Google.
4. It nonetheless appears moderately valued
From 2024 to 2027, analysts count on Amazon’s income and earnings per share to develop at a compound annual development charge (CAGR) of 10% and 17%, respectively. It additionally appears traditionally low cost at 28 occasions subsequent yr’s earnings and a couple of.8 occasions subsequent yr’s gross sales.
Amazon’s near-term valuations is perhaps compressed by the issues about tariffs and commerce wars, but it surely’s already weathered three main recessions and different extreme headwinds since its public debut in 1997. That resilience, together with its clear catalysts for the long run, will forestall me from promoting its inventory.
John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Suzanne Frey, an government at Alphabet, is a member of The Motley Idiot’s board of administrators. Randi Zuckerberg, a former director of market growth and spokeswoman for Fb and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. Leo Solar has positions in Amazon and Meta Platforms. The Motley Idiot has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
