Think You Know Amazon.com? Here's 1 Little-Known Fact You Can't Overlook.

Key Points

• Amazon.com has a front-facing facade that makes it seem like it is a retailer.

• The real story for this online giant is far more complicated.

• If you buy Amazon shares you need to know that the retail business is not its most important operation.

• 10 stocks we like better than Amazon ›

If you are old enough you will remember a time when Amazon.com (NASDAQ: AMZN) was a fledgling online book store. But that was a long time ago at this point, with the company's online presence now so ubiquitous that, for many consumers, it is the first place they look when shopping for anything.

The interesting thing here, however, is that Amazon has now grown to the point where its retail operations aren't the most important feature of the business.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Here's what you need to know.

Image source: Getty Images.

What does Amazon do?

Amazon is an online retailer, which shouldn't come as a surprise to anyone. In the second quarter it sold nearly $61.6 billion worth of goods. The company sells just about anything you can think of. There's a reason why consumers often go to Amazon.com before looking anywhere else.

Only there's something more going on with the company's store. Its value as a retail destination has turned it into something of an online mall. Amazon doesn't just sell goods on its own behalf, it sells products for others.

In the company's second-quarter earnings news release it noted that it had "announced a Nike storefront on Amazon.com where U.S. customers will be able to shop a range of footwear, apparel, and accessories." In addition, the company highlighted that it had expanded its selection with brands like Away, Aveda, Marc Jacobs Fragrances, Milk Makeup, and Origins.

Those brands all have their own identities, and often their own retail locations and websites, but being on Amazon is so important that they have willingly partnered with the online retailer.

And those are just big names; there are smaller companies that sell through Amazon.com, too. In this way, Amazon's retail operation is also a service. This service generates revenue for Amazon, but still only touches the surface of this one little-known fact about the company.

Amazon's AWS division is where the big money lives

The fact that Amazon allows others to use its retail presence to sell their products highlights the service business that's hidden behind the Amazon.com website. But the bigger story is completely technology-related in the form of the Amazon Web Services (AWS) division. This is the company's cloud computing division, in which all it is selling is technology services.

There are two interesting ways to view the situation. If you look at the company's income statement, you will see that product sales were, as noted, around $61.6 billion in the second quarter. Service-based revenue came in at $86.4 billion. From that standpoint alone, Amazon looks more like a service provider than a retailer.

But there's another key figure to consider. Cost of sales, which is basically the price of the items Amazon sold, totaled up to $73.9 billion. That's more than the revenue generated from product sales.

It looks very much like selling things is a loss leader for Amazon. That said, there are a lot of moving parts here. For example, Amazon Prime subscription revenue doesn't go into the product sales line even though it is an important source of revenue. Ultimately, GAAP accounting clouds the view here. It will help to understand how Amazon breaks down its own business.

The company reports three segments: North America, international, and AWS. North America's operating income was roughly $7.5 billion in the second quarter. International chipped in about $1.5 billion. And AWS topped them all with operating income of nearly $10.2 billion.

What is Amazon?

If you buy Amazon stock thinking you are buying the world's most important online retailer you aren't wrong, but you are missing the whole picture. The company's business is increasingly about services, with its AWS division clearly the most important operation it has. In other words, Amazon is more technology stock than retail stock, which is a fact that can get lost thanks to the company's powerful online retail presence.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $670,781!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,023,752!*

Now, it’s worth noting Stock Advisor’s total average return is 1,052% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 8, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nike. The Motley Fool has a disclosure policy.