I invested in Amazon(NASDAQ: AMZN) in early 2016. I only trimmed my position once over the following nine years, and those remaining shares now account for 9.1% of my portfolio. It's now my largest holding with an unrealized gain of about 560%.
With the uncertainty about tariffs, interest rates, and other macro headwinds rattling the markets, it might seem like the right time to sell a few more shares. However, I'm still not planning to prune my position in Amazon for four simple reasons.
Image source: Getty Images.
1. Its retail business is still growing
As the world's largest e-commerce company, Amazon hosts localized online marketplaces in over 20 countries and offers international shipping to more than 100 countries. Its paid Prime service -- which provides discounts, free shipping options, digital perks, and discounts at its Whole Foods Market stores -- has locked in more than 220 million subscribers worldwide.
Amazon's retail business is maturing, but its Prime ecosystem is incredibly sticky, and it will continue to pull shoppers away from smaller retailers. In 2024, its online store sales rose 7% to $247 billion as its physical store sales (Whole Foods and Amazon Go) grew 6% to $21.5 billion. In the first quarter of 2025, its online and physical store sales both increased 6% year over year.
That stable growth was driven by the expansion of its third-party marketplace, investments in its logistics network that boosted its delivery speeds, and its deployment of more AI tools to strengthen its customer recommendations and operational efficiencies. Those improvements should widen its moat and generate long-term tailwinds for its retail business.
2. Its cloud business will profit from the AI boom
Amazon generates most of its revenue from its retail business, but most of its profits come from Amazon Web Services (AWS), the world's largest cloud infrastructure platform. AWS controlled 33% of the global cloud infrastructure market at the end of 2024, according to Canalys.
Microsoft Azure ranked second with a 20% share, followed by Alphabet's Google Cloud with an 11% share.
In 2024, AWS' revenue rose 19% to $107.6 billion. Its operating margin also expanded nearly 10 percentage points to 37%. That robust growth indicates that its superior scale still gives it plenty of pricing power against its smaller competitors.
As the artificial intelligence (AI) market expands, more companies are ramping up their spending on AWS' cloud infrastructure to store more data and handle more demanding AI applications. To address those needs, Amazon is expanding its global data center footprint, developing its own custom AI chips, and working with the AI start-up Anthropic to build new generative AI applications. Those irons in the fire still make Amazon one of the simplest and safest ways to profit from the secular growth of the public cloud and AI markets.
3. Its advertising business is expanding
Most investors recognize Amazon as an e-commerce and cloud company, but its promoted listings, marketplace ads, and digital media ads also make it an advertising giant. In 2024, its advertising revenue rose 20% to $56.2 billion, or 9% of its top line. According to WARC Media, that figure could grow at least 7% to $60 billion, or 9% of its projected revenue, in 2025.
Amazon is now the third-largest digital advertising company in the world after Google and Meta Platforms, according to Emarketer. That business should continue to thrive as more internet users start their product searches on Amazon instead of Google.
4. It still looks reasonably valued
From 2024 to 2027, analysts expect Amazon's revenue and earnings per share to grow at a compound annual growth rate (CAGR) of 10% and 17%, respectively. It also looks historically cheap at 28 times next year's earnings and 2.8 times next year's sales.
Amazon's near-term valuations might be compressed by the concerns about tariffs and trade wars, but it's already weathered three major recessions and other severe headwinds since its public debut in 1997. That resilience, along with its clear catalysts for the future, will prevent me from selling its stock.
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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. Leo Sun has positions in Amazon and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, 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.
