How Amazon gets to $2 trillion

Key Points
  • Amazon got to $1 trillion in market cap far more quickly than Apple did.
  • That's because of its ability to diversify its product offerings. 
  • How it will get to its next trillion? Health, ads, AI, physical stores, and more. 
Jeff Bezos
Getty Images | The India Today Group

On Tuesday, Amazon briefly became the second publicly traded company after Apple to reach $1 trillion in market cap.

Although the stock closed below the magic number, it's remarkable how quickly it joined the trillion-dollar club. It took Apple 38 years, while Amazon did it in just 21. Both companies got there by consistently improving their core products. But Amazon has also diversified its portfolio very quickly, dominating in areas ranging from online retail to cloud.

These days, it's focusing on a handful of areas that could help drive its next phase of growth. Here are the ones we think are the most important:


Amazon's cloud business, Amazon Web Services, has been the clear growth engine for Amazon in recent years. Now on pace to generate almost $25 billion in revenue over the next 12 months, AWS continues to be the backbone of Amazon's expansion.

As streaming, e-commerce grows, so does AWS, says expert
As streaming, e-commerce grows, so does AWS, says expert

In its most recent quarter, AWS jumped 49 percent in sales, the third straight quarter of re-accelerating its growth, after seeing a slight slowdown last year. It also disclosed at least $16 billion in backlog revenue, an important sign that the company is signing bigger corporate clients with longer contracts.

More importantly, AWS is the most profitable unit of Amazon, accounting for 65 percent of the company's total operating income. That profit margin gives Amazon the flexibility to invest in other areas — a key factor in Amazon's quest for continued growth.

Health and pharmacy

The prescription drug market in the United States alone is estimated to be worth about $450 billion, so it's no surprise that Amazon is eyeing it.

It made its first big move in June by buying up an online pharmacy start-up called PillPack for $1 billion, which will give it pharmaceutical licenses in almost every state once the deal closes. That sped up its process to get to market by years, and gave it an opportunity to generate billions in revenues by targeting those who pay cash for their meds before moving into the more complex insured market down the line. That ties in well with the company's buy-up of Whole Foods, where it could add retail pharmacies for members who need their medicines quickly.

Lebenthal: Amazon's $1T valuation is an 'arbitrary line in the sand'
Lebenthal: Amazon's $1T valuation is an 'arbitrary line in the sand'

The company is also exploring a lot of other areas in health care, including selling supplies to doctors and hospitals, piloting its own health clinics for employees and rethinking medical records. In addition, it's teamed up with Berkshire Hathaway and JPMorgan on a joint venture aimed at reducing health care costs and improving outcomes for employees.


Amazon's ad business is growing quickly, recently surpassing $2 billion in quarterly sales. "It's now a multibillion-dollar program and growing very quickly," Brian Olsavsky, Amazon's chief financial officer, said on its first-quarter earnings call. The company generates most of its advertising revenue by selling product search results, allowing sellers to buy sponsored product slots.

That's still relatively small compared to online advertising giants Google and Facebook, which booked $28 billion and $13 billion in ad revenues in Q2 respectively. But Amazon is still getting started. It has yet to exploit the advertising opportunities across all of its platforms, including voice. It also hasn't started selling ads on Prime Video as yet, where it has focused primarily on user experience rather than on revenues.

In some ways, Amazon has a natural edge here— it collects tons of data from users about their actual shopping habits, not just interests or searches, and allows advertisers to reach users right at the critical moment when they're about to make a purchase.

AI and voice

Amazon has made no secret of its intention to transform itself into an AI powerhouse. It's long dabbled in the space with its product recommendations tailored to buyers and sellers on the marketplace, but now it is exploring ways to use the technology across its many teams. Machine learning experts are now scattered across the organization, working on AWS, Alexa and the Amazon Go store, as well as other key projects.

Thanks to this focus, Amazon has excelled over AI rivals like Alphabet and Microsoft in bringing voice technology to the home. Amazon's Alexa is getting easier to talk to over time as it consistently learns from human data.

But even with its massive appeal, monetization opportunities aren't obvious. Shopping through the voice remains difficult for most consumers, and voice devices are still largely used for menial tasks like playing music.

For Amazon, the key is to turn Alexa into a massive developer platform and make it the de facto voice technology for future apps.

If Amazon can succeed in the space, the opportunity is huge. The voice technology market alone is expected to triple in size to $18 billion by 2023, according to Markets and Markets. Beyond that, Alexa could become the system that monitors everything in the home, from the lights to the front door. It might even offer check-ins to combat the problem of loneliness, while delivering healthy food and keeping our kitchens stocked up.

Physical stores

Amazon's surprise acquisition of Whole Foods last year made it clear that it sees a future in physical retail. Given the massive $13 billion price tag, not to mention the $22 billion in additional future contract obligations, this is a particularly big bet for Amazon.

After the deal closed last year, Amazon moved quickly to make Whole Foods a core part of its business. Right away, it cut prices on certain foot items, and now offers Prime benefits and pick-up services in Whole Foods stores. It's also placed its Echo devices prominently in the front of Whole Foods locations.

The success of Whole Foods would help Amazon grow other parts of its business, like its Fresh delivery and private brand products.

The company's also been investing in physical bookstores and AI-powered cashierless Go stores over the past few years, signaling its commitment to further expanding its physical presence.

Amazon's risks are regulation, competition and business maturity, says RBC's Mahaney
Amazon's risks are regulation, competition and business maturity, says RBC's Mahaney