2 Reasons to Buy Amazon Stock Like There's No Tomorrow

Amazon (AMZN -0.41%) has generated billions of dollars in earnings over time thanks to its dominance in the high-growth areas of e-commerce and cloud computing. The e-commerce business sells everything from groceries and other essentials to mass merchandise, fulfilling just about every shopping need. And Amazon Web Services (AWS) has long been the world's biggest cloud services provider, offering businesses a wide range of services from analytics and data storage to artificial intelligence (AI).

In the most recent quarter, these businesses helped Amazon generate more than $158 billion in sales and $15 billion in net income. On top of this, after declining a couple of years ago, free cash flow and return on invested capital (ROIC) are on the rise again. The increase in free cash flow shows Amazon has the resources to support future growth, and gains in ROIC signal the company has made wise investment decisions. The stock performance has reflected this momentum, with the shares heading for a 50% gain this year.

All of this makes Amazon a great stock to own -- now let's check out two reasons why, right now, you should buy this market giant like there's no tomorrow. Both of these points, one related to e-commerce and the other offering a significant boost to AWS, make Amazon a winning choice because they should lead to a new wave of growth in coming quarters and over the long run.

1. An optimized cost structure

Amazon hit a stumbling block back in 2022 as runaway inflation increased costs and supply chain issues upset earnings too. The company even shifted to an annual loss for the first time in nearly a decade. But the troubles didn't last long. Amazon used this as an opportunity to revamp its cost structure -- cutting jobs, increasing efficiency in fulfillment centers, and focusing on delivering packages to customers in a faster and cheaper manner.

One key change involved the shifting of the U.S. fulfillment model from a national one to a regional one. This brings items closer to the buyer, making delivery much more efficient -- and saving Amazon on its cost to serve. In the recent quarter, Amazon said it improved its ability to spread inventory across fulfillment centers by 25% compared to the year-earlier period. And Amazon says it's still early in this process of reorganizing its inventory, so more efficiency and savings should be on the way.

But the plan already has delivered impressive results. It helped Amazon return to profitability a year after the annual loss and has been helping boost revenue ever since. So, this better cost structure helped Amazon quickly recover after a rough period, and now we can count on it powering growth during better times.

2. AI is supercharging growth

If you're looking for a great bet on AI, Amazon is it. The company is benefiting from this hot technology in two major ways. Amazon is a user of AI throughout its e-commerce business to achieve gains in efficiency and improve the shopping experience for customers. For example, the company uses AI to optimize fulfillment center operations and choose the best delivery routes. And it offers customers Rufus, a generative AI shopping assistant.

But where Amazon may be scoring the biggest AI win is through its cloud business. AWS has gone all in on AI, offering customers every type of AI product or service they may need -- from a variety of chips, to coding assistants and even a fully managed service that allows customers to tailor top large language models to suit their projects.

All of this helped AWS reach a $110 billion annualized revenue run rate in the most recent quarter, showing that Amazon has been able to turn its investment into revenue growth.

Considering we're still in the early days of the AI revolution -- with today's $200 billion market forecast to reach $1 trillion by the end of the decade -- and AWS as market leader has a broad audience of customers and potential customers, AI should continue to drive AWS' growth well into the future.