The Motley Fool·2025-09-26 21:00Core Viewpoint - Amazon is positioned to potentially surprise long-term investors with its growth trajectory, aiming for a market capitalization of $5 trillion by 2030, driven by its cloud computing, advertising, and logistics improvements [2][14]. Financial Performance - In Q2, Amazon reported revenues of $167.7 billion, a 12% year-over-year increase, and operating income of $19.2 billion, up 31% [4]. - Amazon Web Services (AWS) generated $30.9 billion in revenue, growing 17.5%, while advertising revenues reached $15.7 billion, up 22% [4]. - The company achieved a free cash flow of $18.2 billion over the last four quarters [4]. AWS Strength - AWS holds a 30% share of the global cloud infrastructure market and is expected to benefit from the shift of IT spending from on-premises to cloud systems [6]. - The transition to AI is anticipated to increase enterprise spending on inference workloads, which could account for 80% to 90% of total AI costs [6]. - AWS reported an annualized revenue run rate of $123 billion and a backlog of $195 billion, reflecting a 25% year-over-year increase [10]. Advertising Business - Amazon's advertising services reach over 300 million people in the U.S. through various platforms, including Prime Video and Twitch [11]. - Recent partnerships with Roku and Disney enhance advertisers' access to premium inventory, expected to boost advertising revenue [12]. Retail Margins - Amazon is restructuring its U.S. logistics network to improve retail margins by placing inventory closer to customers and increasing automation [13]. Future Growth Potential - Amazon's current valuation is at 3.7 times sales, with projections indicating it could reach a price-to-sales multiple of 5 to 7 by 2030 [14][16]. - Analysts forecast Amazon's revenues to approach $1.15 trillion by 2030, suggesting a market capitalization of nearly $5.75 trillion if the price-to-sales multiple expands to 5 [17][18].