E-Commerce Becomes Amazon's Past

Jeff Bezos once said Inc.’s (NASDAQ: AMZN) cloud business would eventually eclipse its original e-commerce operations. In 2018, operating income from Amazon Web Services (AWS) was about the same as Amazon’s massive North American online operations. For 2019, AWS net income blew beyond it.

In 2018, AWS had revenue of $25.7 billion and operating income of $7.3 billion. Amazon’s North American business had revenue of $141.3 billion and operating income of $7.3 billion. In 2019, AWS revenue reached $35.0 billion and operating income was $9.2 billion. North American operations had revenue of $170.8 billion and $7.0 billion in operating income.

The threat to AWS has become the cloud businesses of other tech giants. This is particularly true of Microsoft Corp. (NASDAQ: MSFT), which recently announced strong earnings of its own. Google, Oracle and Salesforce are also in the club that continues to chase AWS. Yet, AWS stubbornly still keeps the lead.

The e-commerce business continues to be founder Bezos’s petri dish. His recent effort at same-day delivery hurt Amazon’s bottom line, although that improved in the most recent quarter. His Alexa-powered home assistance devices are popular, but do they make money? Apple is also in this business, as is Google. Amazon’s streaming media business has brutal competition with Netflix. That competition has included Hulu for years. More recently, Apple and Disney, among others, have started to stake claims.

Amazon’s e-commerce operations also face real competition for the first time in over a decade. Walmart Inc. (NYSE: WMT) has started to pick the lock of the section, based on its recent success. Its plans will be architectural drawings for others. Free shipping is still a cutthroat business. It still relies on Amazon enemies FedEx and UPS, each of which Amazon would like to bury in the shipping sector.

AWS may not have the market share that it once had, but the cloud market is exploding. Amazon probably won’t be caught for first place. It is too far ahead.

Bezos was right all those years ago.

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