Amazon (NASDAQ: AMZN) has been on a tear since joining the Dow Jones Industrial Average in late February, becoming the best-performing stock in the index as of June 27. The company’s success can be attributed to its crown jewel, Amazon Web Services (AWS), which has solidified its position as the leader in cloud infrastructure.
According to the HG Insights 2023 Infrastructure as a Service Market Report, AWS boasts a 50.1% market share among the top 10 cloud providers and has seen the highest year-over-year customer count growth at 31%. This success is reflected in Amazon’s financial results, with AWS operating income nearly tripling in just five years.
While Amazon’s North America and international segments have shown inconsistent operating income and sluggish top-line growth, AWS has been a juggernaut, driving the company’s overall success. The company’s operating income is at a 10-year high, with a strong operating margin thanks to the growth of AWS and improvements in other segments.
Despite its success, Amazon’s stock price reflects its strong performance, leading some to question whether it is still a good buy. While the company’s valuation may be stretched in the short term, its long-term trajectory suggests it has the potential to compound earnings and benefit patient investors.
Ultimately, Amazon remains a decent buy, but investors should be mindful of its valuation and the need for continued growth and margin improvement. The company’s trajectory and strong position in the market make it a compelling investment opportunity for those willing to wait for long-term returns.
