Amazon and Visa: Two Stocks for Long-Term Growth

Amazon's CEO Andy Jassy sees a significant growth runway ahead for Amazon Web Services. He believes customers choose AWS because of its broad capabilities, with AI inference residing near other applications and data. In fact, AWS has a contracted backlog of $496 billion, growing at a triple-digit rate.

AWS revenue grew 37% year over year in the second quarter to $42 billion, with a 39% operating margin. CEO Jassy expects demand to outweigh supply through 2027 and described demand for 2028 as 'striking'. If AWS approaches $1 trillion in annual revenue within a decade or so, Amazon's $2.8 trillion market cap leaves plenty of room for upside.

Amazon shares returned 560% over the past 10 years, beating the S&P 500 by 309%. Analysts expect Amazon's earnings to grow about 20% annually in the years ahead, a pace that can still support market-beating returns. Even with aggressive expansion, CEO Jassy expects demand for AWS to outpace supply through 2027.

Visa operates one of the dominant payment networks with a long runway for growth. It runs the network that authorizes, clears, and settles transactions, earning an extraordinarily high profit margin of 50%. Visa's payment volume rose 10% year over year in the second quarter, while revenue climbed 14% to $11.6 billion.

Visa has a significant opportunity in value-added services, such as fraud protection and software running on top of its network. Revenue from these services rose 34% year over year in constant currency last quarter.