AWS Drives Amazon's Growth as Operating Margin Surpasses Expectations

Amazon's (NASDAQ: AMZN) business is often associated with e-commerce, but its cloud computing segment, Amazon Web Services (AWS), is actually the largest and most profitable part of the company.

AWS's operating margin, which measures profit as a percentage of revenue, was an impressive 39% in Q2 2026. This is significantly higher than North American commerce and International commerce, which account for 58% and 21% of sales respectively, but only generate around 40% of operating profits.

AWS's high operating margin allows it to grow profits rapidly, with a growth rate of 64% in Q2. Amazon is investing heavily in AWS, aiming to meet the growing demand for cloud computing services. In fact, management noted that the company is already experiencing capacity constraints and expects to face similar challenges in 2027.

With its superior operating margin and rapid growth rate, AWS creates a perfect catalyst for Amazon's stock to rise dramatically over the next few years. As data center spending pays off and revenue growth accelerates, investors can expect Amazon's companywide profits to grow faster than revenue.