Amazon (NASDAQ: AMZN) ended 2024 on a excessive word, up 44% in 52 weeks. However extra importantly, it is coming into the yr with all methods go to leverage its e-commerce platform to realize market share and harness the facility of artificial intelligence (AI) to supercharge its cloud platform.
2025 is beginning off sturdy, however you can purchase shares which have long-term potential. Let’s have a look at the place Amazon may be 5 years from now.
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E-commerce: Gaining market share
Amazon has been steadily gaining market share in e-commerce over the previous few years, and eMarketer expects it to have surpassed 40% of complete U.S. e-commerce gross sales in 2024. It bought a variety of competitors from smaller firms that went on-line early within the pandemic, nevertheless it has improved its logistics networks and accomplished a variety of different issues to strengthen its prime place and increase its lead.
It not too long ago switched from a nationwide to a regional warehouse system, and that is vital as bodily retailer chains use their bodily footprint as a distribution channel. Each Walmart and Costco Wholesale are leveraging their many shops all around the nation to ship orders shortly and cheaply, and so they even have the benefit of with the ability to supply omnichannel choices like retailer pickup that Amazon cannot.
As an alternative, Amazon is doing what it does finest: providing the quickest and least expensive supply choices for on-line orders. The corporate can be including tons of merchandise to make sure that its Prime clients proceed to depend on it for all the pieces they want.
It retains bettering velocity, which will increase the prospect that clients will hold utilizing it for his or her on a regular basis necessities and extra, and it is also making efforts to chop prices. Identical-day orders elevated 25% yr over yr within the third quarter, and same-day deliveries are additionally one in all its least expensive methods to function. It not too long ago piloted a brand new warehouse mannequin in Louisiana that includes new robotics know-how. It is already chopping processing time by 25%, which ought to drive a 25% enchancment in prices.
In 5 years, Amazon ought to have much more of the e-commerce market, which itself is rising, producing natural progress alternatives. Because it will get greater, progress may decelerate.
Cloud computing and AI: Accelerating gross sales
Amazon Net Providers (AWS), Amazon’s cloud computing division, accounts for 31% of the overall international cloud market based on Statista. Second-place Microsoft Azure has 20%, and whereas its lead is not as dramatic as in e-commerce, it is nonetheless hefty.
Shoppers who have been budgeting when inflation skyrocketed are spending once more, and extra importantly, purchasers who need to get in on generative AI are flocking to AWS’ platform.
That is as a result of Amazon has developed an extremely highly effective AI enterprise that provides all types of merchandise and options to satisfy virtually any demand. Administration describes it as a three-tier system, with instruments for builders to create their very own giant language fashions (LLM), its personal Bedrock system for midsize enterprises to make use of Amazon’s LLMs, and plug-in options for small enterprise purchasers.
AWS gross sales progress accelerated within the third quarter to 19% yr over yr, and generative AI is already a billion-dollar enterprise. Nonetheless, CEO Andy Jassy thinks it is in its infancy and has huge long-term potential. On December’s third-quarter earnings call, he stated, “It’s a actually unusually giant, possibly once-in-a-lifetime kind of alternative.”
In 5 years, AWS ought to nonetheless be rising at a quick tempo. It additionally accounts for many of Amazon’s working earnings — 62% within the third quarter — and it ought to assist Amazon increase its margins.
Streaming: Staying aggressive
Streaming is not the very first thing folks often consider once they consider Amazon, as a result of Amazon is a lot extra. However it’s nonetheless aggressive in streaming, and it owns MGM Studios, offering it with first-rate content material that rivals the opposite massive gamers.
It has the rights to Thursday Night time Soccer, and the Cowboys-Giants recreation within the third quarter was the most-streamed common season soccer recreation ever. It additionally has extremely rated collection like The Lord of the Rings: The Rings of Energy.
It not too long ago rolled out an ad-supported tier like Netflix and Walt Disney, mixed with a strong promoting enterprise to generate new alternatives within the advert enterprise.
In 5 years, Amazon ought to be capable of keep aggressive, including new content material, beefing up the advert half, and doubtlessly making one other acquisition.
Picture supply: Amazon.
All the pieces else
The advert enterprise has been Amazon’s fastest-growing operation for some time. Accessing Amazon’s tons of of tens of millions of Prime members, who’re all on-line to buy, is a big profit for advertisers. Amazon’s data-rich, AI-based system additionally offers advertisers the instruments to succeed.
Amazon is continually buying new firms whereas launching new merchandise and companies to create extra gross sales alternatives. It is investing in healthcare and its pharmacy enterprise, and it is made a number of acquisitions over the previous few years.
It not too long ago acquired AI firm Anthropic, and I count on that its coming rollouts and acquisitions may also be centered on rising the AI enterprise.
What about Amazon inventory?
Amazon inventory beat the market in 2024, and it is nicely positioned to do it once more this yr. Although it is already made millionaires, this firm nonetheless has unbelievable progress prospects. It might not be the identical as a younger upstart, nevertheless it additionally comes with much less danger. Amazon inventory ought to amply reward traders over the following 5 years.
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John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Jennifer Saibil has positions in Walt Disney. The Motley Idiot has positions in and recommends Amazon, Costco Wholesale, Microsoft, Netflix, Walmart, and Walt Disney. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
