Amazon CEO Andy Jassy Thinks This New Mega-Business Is Like AWS. Here's Why Investors Should Be Paying Attention.
Key Points
Jassy thinks that Amazon Leo is "reminiscent of AWS" in some ways.
Amazon's new satellite internet service could give Elon Musk's Starlink a run for its money.
Leo could help Amazon's other businesses, including AWS, generate more revenue.
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What are the smartest business moves of all time? Amazon's (NASDAQ: AMZN) decision to expand into cloud services has to rank near the top of the list. Amazon Web Services (AWS) now has an annualized revenue run rate of $150 billion. It generates nearly 60% of Amazon's total operating income.
Now, Amazon could be about to have a new AWS-like business on its hands. CEO Andy Jassy told analysts in his company's fiscal 2026 first-quarter earnings call that Amazon Leo, which will soon provide satellite internet services, is "reminiscent of AWS" in some ways. Given AWS's impact on Amazon's stock trajectory, investors should be paying close attention to the company's latest endeavor.
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A lot to like about Leo
Amazon plans to launch its satellite internet service commercially in the third quarter of 2026. However, the company has already launched over 250 satellites. Amazon Leo has also already landed an impressive list of customers, including AT&T (NYSE: T), Delta Air Lines (NYSE: DAL), JetBlue (NASDAQ: JBLU), and NASA.
The pending acquisition of Globalstar (NASDAQ: GSAT) enabled Amazon Leo to pick up an especially important customer -- Apple (NASDAQ: AAPL). Leo will power satellite services for iPhones and Apple Watches using Globalstar's direct-to-device capabilities.
Amazon Leo will be a little late to the space party. Elon Musk's SpaceX owns Starlink, which provides satellite internet services to 10 million customers. However, Jassy noted in Amazon's Q1 earnings call that billions of people worldwide still don't have broadband access. He said, "I am very bullish about Amazon Leo and the opportunity there."
Jassy also thinks that Amazon Leo will have competitive advantages that differentiate it from Starlink. He stated in the Q1 call, "I think we will be about 2x better on the downlink than existing alternatives and about 6x better on the uplink performance than existing alternatives." Jassy added that Leo will also offer customers a cost advantage.
Why investors should pay attention
Leo will give Amazon yet another growth engine. Jassy thinks that it "has a chance to be a very large, many-billion-dollar revenue business." Exactly how many billions of dollars in revenue Amazon Leo might eventually rake in remains to be seen. However, Fortune Business Insights projects that the global satellite internet market will increase by a compound annual growth rate of 17% to $33.4 billion by 2034.
Importantly, the economics of Amazon Leo are likely to improve with scale. Building satellite constellations is expensive. Once they're full deployed, though, adding new customers has only a small incremental cost. Leo's profits could soar over time.
Offering satellite internet services could also boost AWS' revenue. Jassy said that governments and enterprises say they want to store data from the satellite constellation in the cloud, perform analytics on it, and use it in AI models. As a result, he believes the combination of Amazon Leo and AWS will be "very compelling" to these customers.
Jassy told CNBC's Jim Cramer this week that Amazon Leo "completely changes what's possible for people in rural areas." He thinks that Amazon's e-commerce business will benefit from expanded internet access to rural customers. While Jassy didn't go into more detail, it's easy to envision how Amazon could make Leo more enticing to residential customers by bundling satellite internet with Prime Video or Amazon Music.
AWS déjà vu?
Could Amazon Leo be another AWS? I wouldn't go that far. The market opportunity for Leo likely won't be as large as AWS's. However, there are striking similarities between the two businesses.
Most importantly, Amazon won't be an e-commerce stock with a cloud business going forward. It will instead be a global technology infrastructure stock that also happens to be the world's largest consumer discretionary company by market cap. This transition is definitely worthy of investors' attention.
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Keith Speights has positions in Amazon and Apple. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
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