This will be Amazon’s next big move

Shares Amazon (NASDAQ: AMZN) they have more than doubled since the beginning of 2023. This makes the e-commerce giant one of the best-performing stocks on Wall Street.

But the question investors should be asking themselves now is: What’s next for Amazon?

Down answer this question we need to look at Amazon business in numbers. So let’s dive in.

Amazon Web Services is a huge department within the company even bigger business

Amazon is a huge company. In the last 12 months Business generated $590 billion in revenue across multiple business divisions. Each of these segments benefits the entire company in its own way. But there is no doubt about it: Amazon Web Services (AWS) is the jewel in the company’s crown.

Founded in 2006, AWS is the world’s largest cloud services company. The division currently generates more than $100 billion in annual revenue. To put this number into contexttotal AWS sales are currently higher than sales PepsiCo, Walt DisneyAND Nvidia. Moreover, if AWS were a stand-alone publicly traded company, it would be the 36th largest company in the world. S&P500 by revenue – with revenues approximately equal Tesla.

AWS is gigantic and it’s hard to overstate its importance to Amazon. This that’s why Amazon’s next big move is centered around AWS.

AWS is about to undergo a metamorphosis

It’s true: AWS is the largest cloud service provider. Indeed, the latest estimates place AWS at the top of the list of global cloud service providers with 31% market share, followed by Microsoft‘s Azure (25%) i AlphabetGoogle Cloud (11%).

However, this snapshot does not say the whole photo. As recently as 2022, AWS had 33% market share compared to Azure’s 22%. In other words, Azure fills the gap with AWS.

Perhaps in response AdditionallyAmazon CEO Andy Jassy recently announced changes to AWS. Current AWS CEO Adam Selipsky will step down in June. He will to be replaced by Matt Garman.

In addition to the change in management, the company is developing dynamically expenses, as the fight for AI supremacy intensifies. On last month’s earnings call, Amazon CFO Brian Olsavsky said:

What will be Amazon’s next big move and is it worth buying shares now?

Amazon’s next big move is to increase its spending on AWS to meet the challenge from Azure. In the short term, this will reduce the company’s free cash flow as capital expenditure increases. This may be a risky move because it is not certain that the increased spending will increase the company’s share of the cloud services market.

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Amazon, however, has executed similar strategies well in the past, most recently during the pandemic by investing heavily in its distribution network – an investment that is now paying off in the form of faster delivery times thanks to increased regionalization.

In any case, it’s clear that Amazon’s management takes the challenge from Microsoft (and others) seriously. As a shareholder, this is what I want to see from management – a willingness to change course before the problem turns into a crisis. This is another reason why I think Amazon remains a solid long-term investment.

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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Jake Lerch holds positions at Alphabet, Amazon, Nvidia, Tesla and Walt Disney. The Motley Fool covers and recommends Alphabet, Amazon, Microsoft, Nvidia, Tesla and Walt Disney. The Motley Fool recommends the following options: long $395 calls to Microsoft in January 2026 and short $405 calls to Microsoft in January 2026. The Motley Fool has a disclosure policy.

“This Will Be Amazon’s Next Big Move” was originally published by The Motley Fool