Amazon’s market cap has plunged by hundreds of billions of dollars so far this year. Its shares have dropped 35%. Almost none of this can be attributed to its cloud business, which continues to be the world’s market share leader. And the size of this market is likely to continue to grow rapidly. Amazon’s cloud business may be worth more than its e-commerce business, although it is much smaller.
The weakness of the retail sector, in general, was evident in the earnings from Walmart and Target. Each posted poor numbers and grim forecasts. Among their concerns was that inflation will eat margins and rising prices will keep consumers away. While Amazon has few physical stores, it cannot dodge the inflation factor.
Amazon’s North American e-commerce business barely grew last quarter, and its profits plunged. Its International business suffered a drop in sales and lost money. The company indicated that investors should not expect improvements. Management said Amazon faces “ongoing inflationary and supply chain pressures.”
AWS revenue grew to $18.4 billion in the most recent quarter. Operating income was $6.5 billion, up from $4.2 billion a year ago. Based on Amazon’s entire revenue change, AWS may well become the largest share of Amazon’s market cap. That means the value of e-commerce has collapsed.
Amazon’s next quarter will prove that its original business is in share decline. That will drive the stock even lower. AWS is the only net to hold the shares from an even uglier plunge.
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