Amazon Stock Slips 10%: Here's Why It Can Still Finish 2025 With a Market Cap of $3 Trillion

Group 1 - Amazon's stock has recently declined by 10% following its second-quarter earnings report, raising concerns about slower growth in cloud computing and competition in artificial intelligence [1][2] - Despite current challenges, Amazon has the potential to grow its market cap from $2.3 trillion to over $3 trillion by 2025 due to its profit expansion strategies [2][12] Group 2 - The e-commerce division has seen significant profit growth, primarily driven by advertising revenue, which increased from $7.4 billion in Q2 2021 to $15.7 billion in the latest quarter, reflecting a 22% year-over-year growth [3][4] - Amazon's North American retail division has expanded its profit margin to 7% over the last 12 months, with $400 billion in revenue, indicating substantial room for further margin expansion [4][6] Group 3 - International markets are also showing potential for profit margin expansion, currently operating at a 3.4% margin on $150 billion in revenue, similar to the North American model [5][6] - Overall, Amazon's retail segments are projected to contribute tens of billions in earnings power through slight annual profit margin improvements [6] Group 4 - Amazon Web Services (AWS) reported a 17.5% revenue growth, although slower than competitors, it is expected to benefit from the AI revolution, particularly through its partnership with Anthropic [8][9] - AWS is on track to reach nearly $150 billion in annual recurring revenue by the end of 2025, with a strong profit margin of 37% [9][10] Group 5 - Amazon generated $76 billion in operating income and $70 billion in net income over the last 12 months, with projections indicating annual earnings could approach or exceed $100 billion by 2026 [12] - With a forward price-to-earnings ratio of 33, a projected P/E of 30 in 2026 would result in a market cap of $3 trillion, supporting the case for a significant stock price increase in the coming quarters [13]