2. Amazon.com Inc. (NASDAQ:AMZN)
5-year average revenue growth (YoY): 19.70%
Warren Buffett’s Growth Stock Portfolio includes Amazon.com, Inc. (NASDAQ:AMZN), which dominates the markets it serves, particularly in the areas of cloud computing and e-commerce. It has many advantages over its competitors and has become the undisputed leader in e-commerce because of its size and scope, which provide customers with an unparalleled assortment of affordable products. The company is still gaining market share in spite of its size, showing the ongoing secular trend toward e-commerce. In addition to providing a consistent flow of high-margin recurring revenue from consumers who make more frequent purchases from the firm’s properties, Prime unifies Amazon’s e-commerce initiatives. Customers receive unique video content, one-day shipping on millions of items, and other benefits in exchange, creating a strong positive feedback loop where buyers and sellers are drawn to each other. The ecosystem is further strengthened by the Kindle and other gadgets, which help draw in new clients while attracting current ones with their value offer.
Operating cash flow for the trailing twelve months of fiscal year 2024 was $115.9 billion, a 36% increase from $84.9 billion for the same period last year which ended in December. Amazon.com, Inc. (NASDAQ:AMZN) declared in February that it will spend more than $100 billion on capital expenditures (CapEx) this year, with a major emphasis on advances in artificial intelligence (AI). This choice was made despite the rise of DeepSeek, a Chinese AI startup known for generating extremely efficient and cost-effective AI models that have sparked the IT industry. Amazon devotes a significant amount of its capital expenditures to AI development through AWS, or Amazon Web Services, which necessitates initial investments in hardware and data centers to support the platform’s rapid expansion.
Fred Alger Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) is a renowned online retailer and leader in cloud computing. The company’s Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America’s digital transition. During the quarter, Amazon’s shares contributed to performance as the company reported better-than-expected fiscal third-quarter results, with revenues and earnings beating analyst estimates. Operating margins expanded to 11%, driven by efficiency gains in logistics and robust AWS performance. Notably, AWS revenue growth accelerated during the quarter, along with recording its highest-ever operating margin of 38.1%, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.”
