Seattle, Washington – Amazon, a well-diversified business, is making strides in its financial planning and increasing its profitability. With a focus on margin expansion, all segments of the company are expected to contribute to its growth and generate free cash flow. This positive outlook has led to a BUY rating on the stock based on a DCF model analysis.

One of Amazon’s key drivers of earnings over the past decade has been its Amazon Web Services (AWS) segment, which has shown strong performance, generating significant revenues and profits. The strategic entry into the Cloud infrastructure business in 2006 has proven to be a successful move, with AWS maintaining a competitive edge despite the presence of rivals like Microsoft Azure and Google Cloud.

In recent years, AWS has seen a resurgence in revenue growth, although its market share has slightly declined. Nonetheless, the segment’s profitability has been on the rise, with an EBIT margin surpassing 30%. The importance of AWS to Amazon’s overall profitability is evident, as reflected in the appointment of Andy Jassy as CEO in 2021.

While AWS remains a key contributor to Amazon’s success, other segments of the business are also gaining momentum. Improved logistics and economies of scale have bolstered the e-commerce operations, leading to enhanced margins. However, challenges persist in the International operations, which are still operating at a loss.

Furthermore, Amazon’s revenue streams extend beyond e-commerce, encompassing areas such as Advertising and Subscription revenues. These segments, while not disclosing specific profitability figures, are believed to be significant contributors to the company’s overall financial health. Advertising revenues, in particular, have shown strong growth, nearing $50 billion in the past year.

Looking ahead, Amazon’s financial outlook remains favorable, with expectations of continued revenue growth and margin expansion. The company’s focus on innovation and investment in AI technologies through AWS is projected to drive further growth. With a solid operating margin and a track record of strong financial performance, Amazon is poised for sustained success in the market.