Amazon is widely recognized as an e-commerce powerhouse, but its future potential extends far beyond online shopping. What makes Amazon worth a closer look in 2025? The answer lies in how the company has evolved and where it is growing the fastest. Let’s break it down.
After several years, Amazon Price (AMZN) has finally surpassed its all-time high, last seen in 2021. Some investors may feel cautious, especially given the broader market’s strong rally—a reminder of the 2021 surge, which was largely driven by near-zero interest rates. However, Amazon today is not the same company it was three years ago. Its Q3 earnings reveal key developments that paint an exciting picture of its future.
What Sets Amazon Apart in 2025?
Amazon has come a long way since its beginnings as an online bookstore. Today, it dominates about 40% of the U.S. e-commerce market. But is online shopping still the main driver for its growth? Not entirely.
Amazon has built additional revenue streams that go beyond selling products. These new areas, such as cloud computing, subscriptions, and advertising, are not just growing—they’re driving profits.
Here’s what happened in Q3 2024:
- Amazon Web Services (AWS): Revenue from its cloud business grew by 19% compared to last year.
- Subscription Services: This includes Prime memberships, which increased revenue by 11% year over year.
- Advertising: Revenue from ads surged by 19%, fueled by placements in online shopping and video streaming.
While AWS only accounts for 17% of Amazon’s total revenue, it delivered 60% of the company’s operating profit. This means high-margin segments like AWS and advertising are critical to Amazon’s financial health. Isn’t it interesting how Amazon’s strongest profits come from areas other than online shopping?
How Does Amazon Keep Growing?
Amazon’s ability to generate cash is another key reason for its growth. Over the past few years, its cash flow from daily operations has surged, even while the company reinvests heavily into its business. But where does all that money go?
- Expanding Logistics: Amazon continuously improves its delivery network, ensuring fast shipping and seamless service for its customers.
- Building AWS Capacity: Investments in cloud infrastructure allow AWS to handle increased demand while positioning Amazon to benefit from opportunities in artificial intelligence (AI).
Interestingly, Amazon has increased its spending on long-term projects, raising capital expenditures to around 11%-13% of its sales. Normally, higher spending might slow down profits, but in Amazon’s case, the opposite has happened. Analysts predict Amazon’s earnings will grow by an average of 28% annually over the next three to five years. Could this be a sign that Amazon’s strategy is paying off?
Why is Amazon’s Stock Undervalued?
Despite its strong financial performance, Amazon’s stock valuation remains surprisingly low compared to its historical averages. How is this possible?
The market often focuses on short-term earnings rather than cash flow, which is a more consistent measure of a company’s financial health. Over the past three years, Amazon’s cash flow has increased significantly, yet the stock trades about 30% below its decade-long average valuation. This might suggest an opportunity for long-term investors.
What’s Next for Amazon?
Looking ahead, two areas stand out as key growth drivers for Amazon:
- Artificial Intelligence (AI): AWS is set to play a major role in the growing demand for AI services, as companies increasingly rely on cloud computing for AI development.
- Prime Video and Live Sports: Amazon continues to invest in entertainment, and its upcoming coverage of NBA and NASCAR events in 2025 is likely to attract even more viewers. Could this boost its subscription and advertising revenue further?
These developments make Amazon more than just an e-commerce company—it’s a tech and entertainment leader with multiple growth engines.
Deciding whether Amazon stock is a buy, sell, or hold depends on your personal financial goals and risk tolerance. However, Amazon’s focus on high-margin businesses, consistent cash flow growth, and undervalued stock price make it a compelling option to consider.
Rather than relying solely on short-term trends, think about the bigger picture. How often do you see a company that dominates multiple industries and continues to grow at this pace? Whether you’re a cautious investor or looking for a growth story, Amazon’s trajectory makes it hard to ignore.
Final Thoughts
Amazon in 2025 is a company driven by innovation and diversification. While its e-commerce business remains strong, the real growth is happening in areas like AWS, advertising, and subscriptions. By strategically reinvesting its cash flow, Amazon positions itself to capitalize on future opportunities like AI and live entertainment.
The question to ask yourself is this: Do you see Amazon as a company shaping the future of tech and commerce? If so, it might be worth keeping on your radar for the long term.