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Amazon (NASDAQ: AMZN) reported revenue of $134 billion during the three-month period that ended June 30, beating Wall Street estimates by nearly $3 billion. This represented 11% year-over-year growth, an acceleration from the first quarter of 2023. The company registered diluted earnings per share of $0.65, also trouncing analyst expectations.

After seeing its business slow down dramatically in 2022, this top tech enterprise seems to be on solid footing right now. And there continue to be numerous reasons to like the business from an investment perspective.

That said, here’s why Amazon is, without a doubt, my top growth stock to buy in 2023. Let me show you why.

Dominant business segments

According to eMarketer, 38% of all e-commerce sales in the U.S. happen on Amazon’s site. That’s a ridiculous proportion significantly ahead of Walmart, which is in second place with a meager 6% of the industry’s total revenues. Amazon’s online stores increased net sales by 5% year over year, raking in $53 billion last quarter. That growth rate marks the second consecutive quarter that gains accelerated.

It’s also encouraging for shareholders to see that the North American segment posted an operating margin of 3.9% after registering operating losses in each quarter in 2022. CEO Andy Jassy thinks the operating margin can get even higher than it was prior to the pandemic.

Amazon is also a leader in cloud computing, turning what was once a major cost center into a thriving business line. Amazon Web Services (AWS) commands leading market share, well ahead of rivals Microsoft Azure and Alphabet‘s Google Cloud. AWS was still able to increase revenue in the double digits, and it accounted for 70% of company operating profits in Q2.

While investors are likely familiar with Amazon’s dominant presence in online shopping and cloud computing, it’s probably less well-known that the company has a budding digital ads business. Generating revenue of almost $11 billion in the quarter, advertising sales are growing faster than the overall business.

Focus on AI

Artificial intelligence (AI) has been a hot buzzword among corporations over the past several months. This new technology has the potential to have a meaningful impact in various industries. And management teams and investors are trying to properly position themselves for the future.

Amazon has already been at the forefront of utilizing AI throughout its business, like improving product recommendations and summarizing reviews, as well as ensuring damaged goods don’t get delivered to consumers.

Looking ahead, it’s becoming clear that AI will play a big role in how AWS serves its clients. For example, Amazon Bedrock allows developers to build and deploy their own AI systems using Amazon’s vast array of tools. This makes it easier and cheaper for AWS customers to start incorporating AI into their operations.

There are lots of AI-focused start-ups that are attracting funding to develop new products and services. Amazon already has popular offerings where this new technology can be applied immediately in more impactful ways. And this means that the company will probably be one of the leaders in AI innovations going forward.

“Every single one of our businesses inside of Amazon, every single one has multiple generative AI initiatives going right now,” Jassy said on the Q2 2023 earnings call. “And they range from things that help us be more cost-effective and streamlined in how we run operations in various businesses to the absolute heart of every customer experience in which we offer.”

Clearly, investors don’t have to worry about Amazon resting on its laurels. It’s always looking for ways to improve its operations. And that’s true with AI.

Analyzing the valuation

Amazon shares have been on a tear this year. As of this writing, they’re up 59%, outpacing the Nasdaq Composite Index by a huge margin. But this doesn’t mean that they’re expensive. The stock is still 29% off its all-time high price from July 2021. And shares currently trade at a price-to-sales (P/S) ratio of 2.6. That’s still below the stock’s 10-year average of 3.1.

There’s a lot to like about Amazon. The valuation provides investors with a worthwhile opportunity to buy this dominant company.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet,, Microsoft, and Walmart. The Motley Fool has a disclosure policy.

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