Amazon’s (NASDAQ: AMZN) strategic efforts to reduce costs in the retail business are paying off in a big way, with the company generating an impressive $50 billion in free cash flow over the past year. This marks a significant turnaround from a year ago when the company reported negative $3 billion in free cash flow.
The increase in free cash flow is enabling Amazon to make more aggressive capital investments in its highly profitable cloud-services business, Amazon Web Services (AWS). With AWS already generating $29 billion in operating profit on $94 billion in revenue over the last four quarters, the potential for growth in this segment is substantial.
CEO Andy Jassy highlighted the growth opportunities ahead for AWS, particularly as companies continue to adopt AI services and move their IT spending to the cloud. Revenue from AWS grew 17% year over year in the first quarter, signaling accelerating growth in this key segment.
To support the growth of AWS, Amazon is ramping up its capital expenditures, with a focus on expanding its infrastructure and AI efforts. While this increased spending may impact profits in the short term, Amazon has a track record of realizing high returns on its investments.
Analysts project Amazon’s earnings per share to grow at a rate of 23% annually, which could drive significant growth in free cash flow and ultimately double the share price within the next five years. With AWS alone potentially worth nearly half of Amazon’s current market cap, there is significant upside potential for investors.
Overall, Amazon’s strong financial performance and strategic investments in high-growth areas like AWS make it an attractive investment opportunity for those looking to capitalize on the company’s future growth potential.