$496 Billion Backlog: Is Amazon Stock a Screaming Buy at $270?

Amazon's cloud computing arm, Amazon Web Services (AWS), has reached an impressive $496 billion backlog as of its second-quarter earnings. This significant figure represents a substantial amount of unearned revenue that will contribute to AWS's future profits.

AWS is Amazon's most important segment, accounting for 60% of the company's operating income despite making up only 21% of sales. The profit margin of AWS is notably higher than its e-commerce counterparts, which is why Amazon is investing heavily in expanding data centers to meet growing demand.

With a current run rate of $42.2 billion last quarter, it would take nearly 12 quarters or three years for AWS to clear out the backlog. This demonstrates the high demand for cloud computing services, and Amazon's inability to keep pace with it is not seen as a concern.

AWS CEO Andy Jassy noted during the conference call that the company will not be able to fulfill all demand by 2026 or even 2027, and has already started seeing signs of 2028 demand. This suggests a multi-year growth trajectory for AWS and Amazon's stock.

With Amazon trading at a relatively low historical valuation, some analysts believe it may be an opportune time to buy the stock, which is currently priced below $270 per share.