Amazon, recognized as the largest player in e-commerce and cloud services, shows promising potential for further growth.
Over the past three years, Amazon’s stock has surged nearly 170%, significantly outpacing the S&P 500, which increased by less than 80%. The vital question now is: can Amazon keep this trajectory going in the next three years? We need to explore its growth mechanisms, key factors, obstacles, and valuation to assess whether it’s still a smart investment.
How does Amazon generate revenue?
The majority of Amazon’s income stems from its retail operations, with dedicated e-commerce platforms in over 20 countries. The company also owns Whole Foods Market and runs a handful of physical Amazon-branded stores.
However, a substantial portion of its profits comes from Amazon Web Services (AWS), the leading cloud infrastructure provider globally. As reported by Canalys, AWS holds a commanding 32% share of the global market as of the second quarter of 2025, far ahead of competitors like Microsoft’s Azure and Alphabet’s Google Cloud. In the first nine months of 2025, AWS accounted for 18% of Amazon’s net sales and a significant 60% of its operating income.
AWS’s profitability facilitates the expansion of Amazon’s Prime subscription model, allowing for enticing discounts, free shipping, streaming services, and budget-friendly hardware options, sometimes even at a loss. With over 240 million subscribed members, the strength of its ecosystem enhances its advantage over competitors.
Additionally, in the same timeframe, Amazon’s advertising division contributed 9% of its revenue, focusing on promoting products and ads across its platforms. Though this segment’s profitability may not rival AWS’s, it could evolve into a substantial revenue stream, potentially becoming second only to AWS.
What developments have occurred in Amazon’s recent history?
In 2022, Amazon faced challenges, recording just a 9% increase in net sales, while its operating margin plummeted from 5.3% to 2.4%. A dip in investments in struggling EV manufacturers, notably Rivian, led to a net loss. This slowdown was primarily due to inflation affecting consumer spending and a decline in cloud expenditure amid a turbulent economy, causing concerns among investors.
But over the following years, Amazon saw a rebound, with double-digit sales growth, improved margins, and rising earnings per share (EPS). Enhanced delivery times and subsiding inflation contributed to the retail revival, further boosted by an uptick in cloud spending driven by the generative AI trend.
|
metric |
2023 |
2024 |
September 2025 |
|---|---|---|---|
|
Sales growth rate (compared to previous year) |
12% |
11% |
12% |
|
Operating profit margin |
6.4% |
10.8% |
10.9% |
|
Diluted EPS growth rate (YoY) |
Not applicable* |
91% |
42% |
Data sourced from Amazon. YOY denotes year-over-year changes. *There will be a net loss in 2022.
What can we expect from Amazon moving forward?
Analysts project a 12% annual growth rate for revenue and a 20% growth for EPS from 2024 to 2027. The current stock valuation stands at around 29 times the expected 2026 earnings.
If these predictions hold true, with an EPS growth of 15% annually until 2029, Amazon’s stock could rise by over 60% in the next three years. While this isn’t as outstanding as the previous gains, it could still exceed the S&P 500’s average annual return, which is about 10%.
Even with fierce competition from retail giants like Walmart and discount marketplaces such as Temu, Amazon’s scale and robust backing from its highly profitable AWS and advertising divisions should enable it to sustain long-term growth. Therefore, Amazon appears to be a strong investment choice for those looking toward 2026 and beyond.
