Unlike Amazon's (AMZN) - Get Amazon.com, Inc. Report e-commerce segments, the company's Web Services (AWS) division delivered strong results in 2021. And it's expected to expand its revenue even more during the coming years.
In fact, according to Mad Money host Jim Cramer, investors can find proof that the cloud-computing market is growing by analyzing recent results from chip company Micron Technology (MU) - Get Micron Technology, Inc. Report. These results could be a great sign for AWS -- and Amazon's shareholders.
(Read more from Amazon Maven: What to Expect From Amazon's E-commerce Business in 2022)
Micron's Positive News
Micron makes the most basic building blocks of data hardware: memory chips, flash drives, and other computer data storage solutions. In mid-December, the company surprised investors with positive financial results.
According to Cramer, “Micron has these huge up-and-down cycles. It’s an incredible boom-and-bust business. Wall Street thought we were in the middle of a bust phase and maybe that bust phase would last a year, maybe two years, not unusual.”
However, Cramer reports that recent earnings results have shown no sign of a down cycle. That's because the company no longer supplies only the makers of personal computers, laptops, and cellphones. It also sells storage products to data center businesses, including Microsoft (MSFT) - Get Microsoft Corporation Report Azure, Google (GOOGL) - Get Alphabet Inc. Class A Report Cloud, and Amazon Web Services.
Why This Is Good News for AWS
This good news for Micron is also great news for AWS. It shows data center businesses are growing at full speed. In fact, the cloud computing market is projected to hit $1,2 trillion by 2028, reflecting a 19.1% compound annual growth rate (CAGR).
AWS is Amazon's most profitable business. So this is great news for investors -- especially at a time when the company's e-commerce divisions are struggling.
Cramer said, “Because Micron is in everything, the positive pin action lifted a ton of stocks. First, [Micron CEO] Sanjay Mehrotra told us the data center market was incredibly strong, making it hard for them to meet demand. Well, that’s fantastic news for Amazon Web Services, for Microsoft Azure, for Google Cloud, and even IBM.”
An Underestimated Segment?
Wall Street analysts are unanimously bullish on Amazon stock. A lot of this optimism comes from the strength of its AWS division. Not only is Amazon Web Services the market leader in the cloud computing industry, but it's also one of the few actually profitable cloud businesses.
Despite the fact that Amazon stock underperformed the market in 2021, financial reports show that AWS sales grew faster in 2021 than in 2020. This could be a sign the market is still not totally aware of AWS’s relevance. A “buy the dip” approach could make sense now for long-term investors.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Amazon Maven)