What's Going on With Amazon Stock? | AMZN Stock Analysis Part 6

SUMMARY

Parkev Tatevosian, CFA, examines Amazon's non-AI business segments, highlighting their resilience and growth amid economic challenges. The analysis focuses on Amazon's grocery expansion, delivery network efficiencies, and competitive positioning against Walmart.

MAIN POINTS

• Amazon's non-AI segments achieved a 15% increase in units sold year-over-year despite tariffs and other headwinds. [0:30]
• Amazon has become the second largest grocer in the United States, surpassing $100 billion in gross grocery sales. [1:30]
• Recurring grocery orders enable Amazon to generate high-margin incremental sales and improve delivery network profitability. [2:30]
• Amazon aims to match or beat competitors on price, but faces challenges due to third-party sellers and less curated inventory compared to Walmart. [4:00]
• Walmart is perceived as offering higher quality and better-curated products than Amazon, shifting consumer comparisons. [5:30]
• Despite tariffs and higher oil prices, Amazon managed to lower average product prices and maintain strong performance in affected segments. [6:10]

DETAILED ANALYSIS

Amazon's recent performance in its non-AI business segments demonstrates significant resilience and operational strength, even as much of the market's attention remains fixed on the company's artificial intelligence investments and capital expenditures. In the latest quarter, Amazon reported a 15% year-over-year increase in units sold, a result that stands out given the presence of new tariffs and the impact of geopolitical events such as ongoing conflicts. These headwinds were more pronounced this year compared to the prior period, yet Amazon managed to deliver robust growth.

A notable highlight is Amazon's emergence as the second largest grocer in the United States, with gross sales in groceries surpassing $100 billion in 2025. The grocery business is characterized by high purchase frequency and repeat transactions, as consumers regularly buy essentials like milk, vegetables, and beverages. This recurring demand not only drives consistent revenue but also increases customer engagement with the platform.

Additionally, when customers add non-grocery items to their orders, Amazon benefits from higher profit margins because the incremental cost of delivery is minimal once the primary delivery route is established.

Amazon's dense delivery network further enhances profitability by reducing per-order logistics costs. Deliveries to neighborhoods become more efficient as multiple orders can be fulfilled simultaneously, maximizing the utility of each trip. However, Amazon's commitment to competitive pricing is complicated by its reliance on third-party sellers, who set their own prices.

This contrasts with Walmart's model, where inventory is curated and pricing is more tightly controlled, resulting in Walmart often offering lower prices and higher product quality. Consumer perceptions have shifted, with Walmart now seen as providing better quality compared to Amazon's less curated and sometimes lower-quality product selection.

Despite macroeconomic pressures such as tariffs and rising oil prices, Amazon managed to decrease average product prices on its platform compared to the previous year. This performance in the face of significant external challenges has been underappreciated by investors, who may have overlooked the strength and adaptability of Amazon's non-AI segments in recent quarterly updates.

LINKS

• YouTube channel membership for exclusive perks and access to spreadsheets and Discord.
• Special offer for The Motley Fool Stock Advisor.
• Parkev Tatevosian's book on a six-step investing framework.
• Fiscal.ai investment research tool with a discount for viewers.
• Subscription link for Parkev Tatevosian's free monthly newsletter on Substack.

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