Amazon (NASDAQ: AMZN) isn't the world's biggest company by revenue. That title belongs to Walmart, but Amazon could easily pass its brick-and-mortar rival in revenue in just a couple of years.
The tech giant finished 2023 with $575 billion in revenue and 12% growth. At that rate, Amazon will top $1 trillion in revenue in just five years, by 2028, which would make it the first company ever to do so.
The company isn't talking about that milestone yet, but CEO Andrew Jassy laid out a course for it last week in his annual shareholder letter. According to Jassy, Amazon still has a tremendous growth opportunity in front of it as its two major businesses -- e-commerce and cloud computing -- represent a minority of revenue in their respective industries, retail and IT infrastructure.
Jassy also revealed some details in the letter that make it clear that Amazon can keep delivering steady growth. Let's look at three of them.
Image source: Amazon.
1. Expanding same-day delivery
One of Amazon's biggest accomplishments in recent years is rolling out same-day delivery. Not only is ir a winner with customers, since they always want faster delivery, but it's also a cost-saver. In his shareholder letter, Jassy said the company reduced its shipping costs per unit in 2023 for the first time since 2018, and its same-day service was an important part of that reduction.
The company has opened 58 same-day-fulfillment facilities in the largest metros in the U.S., stocking its most popular 100,000 SKUs. Because the facilities are so close to the customers and have streamlined the most popular items, they constitute the company's lowest cost to serve in its network, and Amazon aims to expand them.
Amazon said it would double the number of same-day facilities and envisions expanding same-day options beyond conventional items to perishable foods, using its Prime Air drone delivery, which Jassy said would allow the company to deliver orders in less than an hour. It's unclear when Amazon will begin delivering by drone, but Jassy's comment on it shows that Amazon still aims to make drone delivery a reality.
Meanwhile, its proliferation of same-day delivery creates a virtuous cycle, lowering costs and increasing customers, which drives new business. Same-day delivery will continue to drive revenue growth for Amazon.
2. International markets are reaching profitability
Amazon's international segment has historically been a drag on profitability. In 2023, for example, the company lost $2.7 billion in the international segment, compared with a loss of $7.7 billion in 2022. However, the company is making progress in more developed markets, and the overall loss tends to belie its progress, as Amazon continues to expand into new markets.
Jassy noted that Mexico turned profitable in the fourth quarter, and he said of other emerging markets, "We have high conviction that these new geographies will continue to grow and be profitable in the long run."
The international segment will probably never be as profitable as North America since Amazon's resources are more concentrated in its home country, but there's still a lot of room for growth and profitability in international markets, especially as its more mature markets gain leverage and expand their margins.
3. Generative AI could be huge for Amazon
Unlike some of its big tech peers, Amazon has yet to capitalize on generative AI in an obvious way. Microsoft has partnered with OpenAI to include its technology in several of its products. Alphabet has introduced its own chatbot, Gemini, and is moving to include generative AI technologies in other products.
Amazon is angling for a piece of the generative AI pie as well. The company is investing $4 billion in generative AI and sees Amazon Web Services (AWS) playing a major role.
The company introduced Bedrock, a managed service to help customers take a foundation model like a large language model, add their own data, and use AWS's security and features to create their own generative AI application. Among the companies using Bedrock are Pfizer, Delta Airlines, and Perplexity AI. Jassy said, "We're optimistic that much of this world-changing AI will be built on top of AWS."
Amazon has also made its own AI chips for training and inference, named Trainium and Inferentia, which has attracted prominent customers including Airbnb, Snap, and Anthropic, showing it has more than one way to capitalize on generative AI.
The path to $1 trillion in revenue
Despite being the No. 2 company in the world by revenue, Amazon is still valued as a growth stock, trading at a price-to-earnings ratio of 63. To deliver on those expectations, the company will have to continue to grow and to expand its margin.
With the opportunities in front of it in e-commerce and cloud computing, Amazon looks to be on track to hit $1 trillion in revenue and deliver solid returns for investors along the way.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Airbnb, Amazon, and Snap. The Motley Fool has positions in and recommends Airbnb, Alphabet, Amazon, Microsoft, Pfizer, and Walmart. The Motley Fool recommends Delta Air Lines and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
