Amazon Q3-2024 Analysis

Amazon's total sales over the past four quarters (Q4-2023 through Q3-2024) totaled $620 billion. In FY2020, this was still $386 billion. This represents a compound annual growth rate (CAGR) of 13.5% over this period. From 2014 to 2023, CAGR was even 23%. How fast will Amazon be able to grow in the coming years?

In my valuation model, I assume a revenue growth of 9.2% CAGR through 2030. This would mean that Amazon would generate more than $1 trillion in revenue by FY2030. A massive figure, but one I believe is achievable.

The company segments expected to grow the fastest are Third-party seller services, Advertising services, Amazon Web Services (AWS), and Subscription services. Over the past ~4 years, these segments have already been growing much faster than Amazon's Online stores (5.6% CAGR) and Physical stores (6.8% CAGR).

Revenue from Subscription services increased by 15.6% CAGR, Third-party seller services by 18.5% CAGR, Amazon Web Services (AWS) by 24.4% CAGR, and Advertising services by even 24.7% CAGR (the latter since Q3-2020).

Although AWS has shown an acceleration in revenue growth in recent quarters (i.e., the year-over-year growth is increasing by percentage points), these growth rates are expected to moderate in the coming years. This is because the base from which revenue growth must be achieved is getting larger. The law of large numbers teaches us that growth becomes increasingly challenging: Amazon is dependent on our physical world with a limited number of customers.

Despite this, I still see growth potential for Amazon in the coming years. Also in profitability. The company has always prioritized future growth, which is why its profits have continuously been reinvested into the business. Currently, Amazon is doing this in the form of high CAPEX investments focused on expanding its AI infrastructure.

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