This has been another strong year for the stock market, and once again Amazon(NASDAQ: AMZN) has been a market leader. The stock is up roughly 48% year to date as of this writing -- and more than 150% over the past five years. Despite its strong recent performance, it still seems like a sound choice in this current bull market.
Let's look at four reasons investors should be buying Amazon stock like there is no tomorrow.
1. Amazon is the cloud computing leader
Amazon is best known as being an online retailer, but the company's best segment for profitability is actually Amazon Web Services (AWS), its cloud computing unit. Over the past 12 months, AWS generated operating income of $36.4 billion, while North American operations have produced operating income of $22.2 billion and its international segment $2.1 billion.
AWS is the leader in cloud computing, with about a 31% market share, ahead of Microsoft's Azure at 20% and Alphabet's Google Cloud at 12%. And with the explosive growth of artificial intelligence (AI), its cloud computing growth has accelerated. Last quarter, AWS revenue jumped 19% year over year, while the segment's income surged 49%. Amazon management called generative AI a "once-in-a-lifetime type of opportunity," noting that the AI-related revenue at AWS rose by triple-digit percentages in the quarter.
The company is helping capture this AI opportunity in a few ways. Management says it is seeing more customers standardize on its SageMaker platform, which helps them build their own AI models, manage AI data, and move into production. It also provides foundational AI models, both from itself and other AI companies, through its Bedrock platform. Amazon said it had recently added Meta Platform's Llama 3.2 models, Anthropic's Claude 3.5 Sonnet model, and Mistral's Large 2 models to the platform.
The company is also making its own custom AI chips specifically for training large language models (LLMs) and AI inference. Apple has recently said it is an Amazon AI chip customer.
AI remains a huge opportunity for AWS, and Amazon is investing to capitalize on this opportunity.
Image source: Getty Images
2. Amazon is still the online retail king
Although AWS has become Amazon's most important business, it is still the e-commerce king. The days of explosive retail growth have passed, but its retail segment still performs well. Last quarter, it grew its North American revenue by 9% year over year, and its international revenue was up by 12%.
The company continues to invest in automation and is using AI to help with warehouse efficiency and to better plan shipping routes. This helps with costs and is leading to even stronger profitability growth: Last quarter, its North American segment saw its operating income soar 33% year over year, while its international segment flipped to profitability.
Amazon will look to use AI to help revenue growth as well. It is employing it to make it easier for third-party sellers to be able to list their products on its site. Its AI is also helping with better product recommendations and to better answer customer questions about products.
And the company is seeing solid growth with its sponsored ad business, with AI helping to improve the relevancy of ads it serves in this area as well.
3. Winners win
Over time, Amazon has proved itself to be a winner. And at the end of the day, winners find ways to win. The company has shown itself to be able to innovate and adapt.
It started out by selling books online to become the largest online retailer and logistics company in the world. In doing so, it completely disrupted the entire retail industry. Meanwhile, its largest and fastest-growing business, AWS, is an industry that Amazon created from a side project.
Amazon has always been willing to spend money and invest in order to grow to win, and with the huge AI opportunity, there is every indication it will do what it takes to be a big winner.
4. Amazon has an attractive valuation
In addition to its strong businesses and solid growth outlook, Amazon also trades at an attractive valuation. Its forward price-to-earnings ratio (P/E) of about 36.5 is based on 2025 analyst estimates. Its valuation has risen, but it's still below where it has traded from a historical P/E level prior to 2023.
The company's earnings will often be impacted by periods of investment, but it has always come out the other side stronger after these periods.
Overall, Amazon is a great company trading at a reasonable valuation, with a long history of being an innovator and winner. That is the type of stock that can be a core holding.
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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, and Microsoft. 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.
