Key Points
Amazon (NASDAQ: AMZN) may be best known as an e-commerce company, but the largest segment of its business is Amazon Web Services (AWS), primarily due to its impressive operating profit margin. During Amazon’s second quarter (Q2) of 2026, AWS’s operating profits rose at a jaw-dropping 64% pace, resulting in an incredible 39% operating margin.
That’s a huge deal for Amazon’s financial picture, and I think it’s the single best reason to buy the stock, as it allows a smaller revenue segment to shine.
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AWS is the most important part of Amazon
Amazon’s business is broken up into three parts: North American commerce, International commerce, and AWS. In Q2, these business units accounted for 58%, 21%, and 21% of sales, respectively. Despite North American and International commerce making up 79% of total sales, they only account for about 40% of operating profits. AWS accounts for 60% despite being a much smaller portion of sales.
Why is that the case?
It’s because of AWS’s superior operating margin. Because Amazon can earn a far greater profit per dollar of revenue in AWS, it tilts the scales in favor of this business segment. Amazon knows this, which is why the company is focusing all of its available capital expenditure dollars into building out infrastructure so AWS can continue to grow at its rapid 37% pace. Management also noted that the company is in a compute-constrained state, and AWS won’t have enough capacity to meet demand in 2026, and the same will likely be true in 2027.
With Amazon’s most profitable business segment growing at the fastest pace, it creates a perfect catalyst for Amazon’s stock to rise dramatically over the next few years. All of Amazon’s huge data center spending will start to really pay off, and it’s possible that its AWS revenue growth rate will accelerate, too.
Due to AWS’s superior operating margin, Amazon’s companywide profits will grow faster than revenue, which is music to investors’ ears. This effect can produce market-crushing stocks, and I think that’s exactly what Amazon will be over the next five years.
There are few companies with a setup like Amazon’s, with its rising growth rate and improving operating margins. I think that makes Amazon a top stock to buy right now, and definitely at the top of the list of the best artificial intelligence stocks to buy during the remainder of 2026.
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Keithen Drury has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
