Amazon surpasses Walmart as world's largest retailer with $575B revenue

Amazon's cloud business fuels its retail dominance

Amazon has surpassed Walmart as the world's largest retailer outside of China. The company reported over $575 billion in revenue for the last 12 months, edging out Walmart's total.

This milestone was not achieved by its online store alone. The victory was powered by Amazon Web Services (AWS), the company's highly profitable cloud computing division.

How AWS bankrolls Amazon's retail ambitions

While Amazon's online retail operations are massive, they often operate on thin margins due to costs like shipping and discounts. AWS operates differently.

It provides the essential computing infrastructure for a huge portion of the internet, from Netflix to NASA. This business is extraordinarily lucrative, generating billions in profit that Amazon can reinvest.

"Amazon essentially has this money-printing machine called AWS that allows it to fund loss-leading strategies in retail," said Juozas Kaziukėnas, founder of the research firm Marketplace Pulse. This financial engine lets Amazon absorb losses in its core store to win market share.

The high cost of competing with Amazon

Walmart, in contrast, must fund its entire operation from its retail sales. It has made significant investments in its own e-commerce and fulfillment network to compete.

These investments are costly and cut into profits. For instance, Walmart's recent earnings showed its operating income grew at half the rate of its sales, highlighting the financial strain of the competition.

"Walmart is trying to build an Amazon-like infrastructure, but it has to pay for it solely from the money it makes selling groceries and gadgets," Kaziukėnas explained.

A tale of two different business models

The contrast between the two companies is stark. Amazon is a tech giant that also runs a massive store. Walmart is the world's most sophisticated brick-and-mortar retailer trying to master online sales.

Amazon's model allows for aggressive, long-term bets. It can afford to lose money on one-day shipping for Prime members because AWS profits cover the cost.

Walmart's model requires more immediate financial discipline. Its investments must show a clearer, quicker path to profitability to satisfy shareholders.

The future of the retail rivalry

Walmart is not standing still. The company is aggressively automating its warehouses and stores to reduce long-term costs. It is also expanding its high-margin advertising business, following Amazon's playbook.

However, the fundamental asymmetry remains. Amazon's dual-engine model—a cash-generating cloud business and a growth-focused retail operation—provides a unique advantage.

As retail becomes increasingly digital and driven by data, AWS provides Amazon with not just capital, but also superior technology and insights that Walmart must pay to develop or acquire.

The race continues, but for now, Amazon's cloud has lifted its retail arm to the top.