If you invested in Amazon(NASDAQ: AMZN) at the start of any year over the last 20 years, you'd be up on your investment five years later, every time. And this is true as well for time periods that haven't yet hit the five-year mark. For example, if you invested at the start of 2024, you'd be up right now even though the stock has pulled back more than 20% from its high.
In other words, it's been a bad idea to bet against the stock, historically speaking. Nevertheless, there are some investors who are betting against this retail and cloud-computing giant due to economic uncertainty.
But Amazon stock is likely still a great long-term buy for those who can tune out the noise, as I'll explain.
Here's what can drive returns for Amazon
Amazon's retail business is absolutely massive. The company has many moving parts, so honing in on just retail operations is challenging. But adding up online stores, physical stores, and third-party seller services, it had net sales of nearly $100 billion in the first quarter of 2025 alone.
Image source: Amazon.
These three line items accounted for 64% of the business in the first quarter, showing just how important retail is for the company. And with its massive customer base, as well as sprawling infrastructure for logistics and shipping, I don't believe anyone will meaningfully disrupt Amazon anytime soon.
To be clear, it is facing headwinds from uncertainty with tariffs. CEO Andy Jassy flatly said, "None of us know exactly where tariffs will settle or when."
This lack of clarity unsettles some investors. But it's important to remember that tariffs are an industrywide headwind, meaning this situation is unlikely to disproportionately impact Amazon compared to its competitors.
In other words, its shareholders can expect the company to stay the course with its retail business. And this large, unchanging part of the business provides the stability it needs to keep forging ahead with something that will drive strong shareholder value in coming years.
What will drive shareholder returns in coming years? I believe it will continue to be growth in Amazon Web Services (AWS).
AWS, the cloud-computing division, has generated $112 billion in trailing-12-month net sales. But investors shouldn't think that growth is peaking simply because of its already gargantuan scale. It grew by another 17% in the first quarter, which is impressive on its own. And it doesn't begin to scratch the surface regarding its potential.
Jassy points out that only about 15% of global spending on information technology (IT) is currently directed toward cloud computing. But within 20 years, he expects it will be closer to 85% of spending. In other words, AWS is a leading platform in the cloud-computing space, which Jassy expects to more than quintuple in size over the next two decades.
Therefore, there's reason to continue to believe in the long-term growth potential for AWS. And right now, this growth is undeniably being driven by the trends in artificial intelligence (AI). According to management, Amazon's AI business is growing at a greater than 100% annual pace and is already generating billions of dollars in annual net sales.
If the AI business was a stand-alone company, it would be one of the most talked about businesses in the world. But it's easy for investors to lose sight of it when looking through Amazon's empire.
To summarize, the company's main retail business will be fine, in spite of tariff headwinds. And AWS is poised for a decade or more of solid growth. That's important when looking at the stock as an investment. After all, AWS is extremely profitable. And higher future profits will likely lift the stock.
Just for perspective, the first-quarter operating margin for AWS was nearly 40%. And it accounted for 63% of the company's total first-quarter operating income. In short, it doesn't take much top-line growth for AWS to greatly improve the bottom line for the entire company. Therefore, as it grows, thanks to AI and a shift in IT spending to the cloud, Amazon's profits should grow dramatically.
It might not show up immediately in 2025 -- patience is still important. But I'm comfortable in my belief that Amazon's profits will be meaningfully higher in five years, which will likely send the stock higher as well. And this is why I still believe it's a long-term buy.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jon Quast 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.
