Amazon is without question the blue-chip of technology stocks and has created enormous amounts of wealth for investors over the past decade. But do you understand one of its key revenue drivers?
But what many investors don’t realise is that Amazon is actually losing money on its international retail operations but there is a secret weapon in the Jeff Bezos armoury: AWS.
AWS stands for Amazon Web Services, and it’s a catch-all for the various cloud services Amazon provides that allow businesses to store information and deliver content.
Amazon is the runaway leader in the cloud services space – in 2018 it owned nearly 30% of the overall market — nearly twice the market share of the next closest competitor.
That leadership position led to a big windfall for Amazon. In 2018, AWS booked almost $26 billion in revenue, but because cloud services is a high-margin business that scales well, it generated over $7 billion in operating income.
Put another way, Amazon made the same amount of money on $26 billion in AWS revenue as it did on $140 billion from its North American retail operations.
In this video, the team from The Motley Fool look more closely at AWS: