Amazon's (NASDAQ: AMZN) share price is up 38% over the past three years, making its returns nearly identical to the S&P 500's over the same time frame. Beating the market is the long-term goal of many investors, so it's understandable why some may be wondering what's the best course to take with Amazon right now.
I think there are several compelling reasons why holding onto your Amazon stock if you have it or buying shares now could still be a great strategy. Here are three reasons to buy (or continue holding) Amazon stock in 2025.
Image source: Getty Images.
AI cloud computing is just getting started
Some investors were disappointed by Amazon's recent fourth-quarter results, in which the company's Amazon Web Services (AWS) revenue of $28.79 billion slightly missed Wall Street's consensus estimate of $28.84 billion. Still, AWS sales were up 19% from the year-ago quarter and the segment accounted for 50% of Amazon's total operating income.
I think investors who reacted negatively missed the bigger picture with Amazon and its cloud opportunities. AWS is still the leading cloud provider, with 31% of the market share, ahead of Microsoft with 20%.
That puts Amazon in an amazing position to benefit as demand for artificial intelligence (AI) cloud computing grows. Companies are in a race to have the most capable AI services and Goldman Sachs estimates that AI cloud revenue could reach global sales of $2 trillion by 2030. As the undisputed leader in cloud computing, Amazon should be able to tap into the surge of AI cloud services.
Amazon still dominates e-commerce
While plenty of retailers have made strides in their e-commerce offerings, they still fall short of Amazon's dominance. The company has about 40% of the U.S. e-commerce market, compared to rival Walmart's 7%.
And the company continues to improve its platform and delivery network to make shopping even better for customers. Amazon delivered over 65% more items to its Prime members on the same day they ordered or overnight in the fourth quarter of 2024 compared to a year earlier. It also had a record-breaking Black Friday week and Cyber Monday event last year.
The result was that North American sales jumped 10% in the fourth quarter to $115.6 billion and operating income from the segment rose 43% to $9.3 billion.
E-commerce accounted for about 16% of all retail sales in the U.S. last year and will increase to 20% by 2028, according to eMarketer. With Amazon's leading position and more e-commerce growth on the way, the company is poised to benefit.
Advertising continues to be a winner
It's worth mentioning briefly that Amazon's advertising business continues to expand. Ad sales rose by 18% in the fourth quarter to $17.3 billion. To put that in perspective, Amazon had just $12.6 billion in annual ad sales in 2019.
Amazon will take about 15% of the digital advertising market this year, according to estimates from Statista, making the company an increasing threat to other online ad companies. Amazon's ad revenue topped $56 billion in 2024 and management says its ad revenue will have an annual revenue run rate of $69 billion this year.
While it's not Amazon's most important business, it's become a healthy addition to the company's growing dominance across new markets.
Is there a case to sell Amazon?
I don't think there's much of a case for selling Amazon stock right now. Of course, there are always legitimate financial reasons for selling a stock, like buying a home or paying for a child's tuition.
Amazon continues to benefit from its core e-commerce and cloud computing businesses and has increasing opportunities from smaller segments like advertising. Since the company is a clear leader in its respective markets, buying Amazon (or holding what you have) still looks like a smart move.
And while the stock isn't exactly cheap -- it trades at a forward price-to-earnings multiple of 32.3, compared to the S&P 500's 23.8 -- it's still relatively well-priced considering the company's long-term prospects.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $765,576!*
Now, it’s worth notingStock Advisor’s total average return is890% — a market-crushing outperformance compared to170%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Goldman Sachs Group, Microsoft, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
