With Amazon Braced for Potential Market Dominance in 2025?
If you're like me, finding investments that outperform the market year after year is a dream come true. And one company that's consistently delivered is Amazon, or AMZN as it's known in the stock market. But after a strong 2024 (Amazon's stock gained nearly 50%), can it repeat its success in 2025?
Amazon isn't just an e-commerce giant; it has several unique business segments. While the online store brings in the most sales (a staggering $61.4 billion in Q3, up 7% year over year), it's not where the real growth lies. Two key areas driving Amazon's success are its advertising services and its cloud computing division, Amazon Web Services (AWS).
Amazon's advertising business has been a major revenue and profit driver. In Q3, it brought in $14.3 billion in ad revenue, up 19% year over year, and is the company's fastest-growing segment. The advertising division is not just boosting Amazon's growth but also its profits. Although Amazon doesn't share specific advertising margins, other ad giants like Meta and Alphabet post operating margins in the 30% to 40% range. Considering Amazon's Q3 operating margin was 11%, it's safe to assume ads have given Amazon a significant boost.
Then there's AWS, Amazon's cloud computing wing. Although AWS's growth slowed compared to its competitors, it's now accelerating again due to an increase in artificial intelligence (AI) workloads. Amazon partnered with Anthropic, the company behind the popular Claude generative AI model, which helped AWS catch up with competitors like Google Cloud and Microsoft Azure. In Q3 2024, AWS grew 19% year over year and boosted its operating margin by 50%.
Wall Street analysts expect Amazon's revenue to grow by 10.8% in 2025, with EPS rising 20%. If Amazon can maintain this momentum while keeping its valuation in check, a repeat performance in 2025 isn't out of the question. But expect the market-beating gains to be more moderate compared to the near-50% rise in 2024.
In order to sustain its growth in 2025, Amazon might need to strategically allocate its financial resources, considering the potential workloads in artificial intelligence. This could potentially allow Amazon to maximize returns from its investments in sectors like advertising and cloud computing, such as AWS.
Given Amazon's consistent performance in the finance sector, some investors might consider it a pinnacle of success in the realm of stocks, with the potential to provide substantial returns, even if the market-beating gains are more moderate compared to previous years.
To achieve this, Amazon should continue its focus on its revenue drivers, including its advertising services and AWS, which have proven to be significant growth areas. By allowing these segments to thrive, Amazon has the opportunity to continue its financial success, potentially positioning itself for another strong year in 2025.
Investors interested in capitalizing on the potential of Amazon in 2025 should closely monitor the company's financial performance in relation to its targets, such as the projected 10.8% revenue growth and 20% EPS rise, as these figures could indicate whether Amazon is on track to repeat its 2024 success in the stock market.
