Amazon's (NASDAQ:AMZN) stock has been closely associated with its operating income, which has surged by a remarkable 2,700% over the past decade, largely due to the performance of Amazon Web Services (AWS), the company's cloud-computing platform. A decade-long analysis reveals a strong correlation between Amazon's stock price, which has risen approximately 800%, and its operating income.
In the first half of 2023, AWS accounted for nearly 17% of Amazon's total net sales, amounting to $43.5 billion. Even more significantly, AWS generated $10.5 billion in operating income during this period, representing 84% of Amazon's total operating income. The influence of AWS on Amazon's overall financial health is palpable, indicating that without this business unit, the returns on Amazon's stock would likely have been drastically different over the past decade.
Artificial intelligence (AI) and machine learning advancements are set to play a significant role in the future growth of AWS. Amazon CEO Andy Jassy attributes much of AWS's expansion to these technological trends. Despite AI being a relatively new term in investment circles, its potential for growth is substantial. The AI market is expected to grow at a compound annual rate of over 37% through 2030, reaching a value of $1.8 trillion according to Grand View Research.
The potential impact of AI on AWS is further highlighted by the financial outlook for 2023. By the end of the second quarter, Amazon had $132.1 billion in remaining performance obligations, primarily related to AWS. These obligations represent the revenue Amazon expects to generate over the next few years from existing cloud-computing agreements.
The remaining performance obligations for AWS in Q2 showed an increase of $12 billion from the previous quarter and $32 billion from the same period in the previous year. This growth trajectory, combined with the projected expansion of the AI market, suggests a promising future for AWS and, by extension, Amazon's operating income and stock price.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.