Amazon (AMZN 1.34%) has an amazing and robust business that has enabled it to generate fantastic returns over the years for its shareholders. While it’s best known for its online marketplace, the company’s operations are far broader than that. Amazon has continually found ways to innovate and expand its growth prospects, which is a key reason it’s one of the most valuable companies in the world today.
Thanks to those efforts, there is still a lot of upside for the business in the future. That’s particularly evident when you look at one specific statistic, which should give investors plenty of hope that the business will be even bigger and more valuable in the future.
Image source: Getty Images.
Amazon Web Services’ operating profits have soared 61% in just five quarters
The lion’s share of Amazon’s revenue comes from its online marketplace. But when it comes to overall profitability, the company’s cloud business, Amazon Web Services (AWS), is the driving force. Here’s a breakdown of its operating income by its major segments:
| Segment | Operating Income | % of Total |
|---|---|---|
| North America | $5,841 | 31.7% |
| International | $1,017 | 5.5% |
| AWS | $11,547 | 62.7% |
Source: Company filings. Table by author. Figures in millions
What’s encouraging for growth investors is that AWS is not only a huge moneymaker for the business, but it has also been a key growth area. Companies have been investing more in tech and artificial intelligence (AI), which has led to a greater need for cloud storage and upgraded infrastructure.
Over the past five quarters, AWS’ revenue has risen by 21% to $29.3 billion. But what’s even more impressive is that AWS’ operating income has climbed by an even faster rate of 61% over that same stretch. Margins for AWS have been improving, and as the company invests heavily into AI, it wouldn’t be surprising if they get even better in the future.
Amazon’s stock could look even cheaper than it already is
Historically, investors have often paid a high premium for Amazon’s stock given its long-term potential. And the chart below helps illustrate just how discounted the tech stock is with respect to its price-to-earnings multiple.
AMZN PE Ratio data by YCharts
While its average has been a little skewed due to a tough year in 2022 when inflation was weighing on economic conditions and consumer spending, it hasn’t been uncommon to see the stock trade at more than 60 or even 70 times its trailing earnings.
Amazon looks like a slam-dunk buy right now
Even though Amazon’s valuation is already sizable with a market cap of $2.2 trillion, there can still be considerable upside ahead for the stock as AWS continues to be a growth machine for the business. Buying Amazon stock today at a P/E of less than 35 seems like a bargain, especially given the momentum of AWS, the potential for more growth there, and those strong margins helping pad Amazon’s bottom line in the future.
Year to date, shares of Amazon are down more than 5% as of this writing, and it hasn’t looked like a great buy in 2025. But that has arguably more to do with the concerns weighing on the overall economy and the uncertainty around tariffs than it does with Amazon’s business, which still looks solid — in the trailing 12 months, the company generated nearly $21 billion in free cash flow.
With diverse operations, strong margins, and plenty of opportunities to grow its operations in the future, this is a safe stock that you can buy and hold for the long term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski 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.
