How Does Amazon Make its Money?
Amazon operates an e-commerce marketplace, Amazon Web Services (AWS) cloud computing platform, a digital advertising business, and various subscription services (Prime). While most people think of Amazon as an online retailer, the company’s profits come overwhelmingly from AWS and advertising — the retail business runs on razor-thin margins.
Amazon (AMZN) Business Model
Amazon operates in the e-commerce & cloud sector. Below is a summary of Amazon’s revenue streams, how the company generates income, and the key financial metrics from its most recent annual report. This breakdown uses data from Amazon’s 2025 fiscal year 10-K filed with the SEC on February 6, 2026.
How Amazon’s Revenue Flows to Profit
The diagram below traces Amazon’s $717B in total revenue through cost of sales to $361B gross profit, then through operating expenses to $80B operating income, and finally to $78B in net income. Hover over any flow or node to explore the breakdown.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Amazon Competitors
Amazon’s key competitors and comparable public companies in the e-commerce sector include Shopify, Snowflake, and Nvidia. Each of these companies competes for market share, investor attention, and revenue in overlapping segments. See how Amazon stacks up by comparing their revenue breakdown, margins, and growth metrics.
Revenue Breakdown
| Segment | 2025 | 2024 | YoY Growth |
|---|---|---|---|
| Online Stores | $269.3B | $247.0B | +9.0% |
| Physical Stores | $22.6B | $21.2B | +6.3% |
| Third-Party Seller Services | $172.2B | $156.1B | +10.3% |
| Advertising | $68.6B | $56.2B | +22.1% |
| AWS | $128.7B | $107.6B | +19.7% |
| Subscriptions (Prime) | $49.6B | $44.4B | +11.8% |
| Other | $5.9B | $5.4B | +9.4% |
| Total Revenue | $716.9B | $638.0B | +12.4% |
Online Stores — 38% of Revenue
Direct retail sales where Amazon buys inventory and sells it to customers. This is the classic Amazon shopping experience. Margins are thin (1-3%) due to fulfillment, shipping, and return costs.
Third-Party Seller Services — 24% of Revenue
Marketplace fees, FBA (Fulfillment by Amazon) fees, and commissions from the millions of third-party sellers on Amazon. Higher-margin than first-party retail since sellers bear inventory risk.
AWS — 18% of Revenue
Amazon’s cloud computing platform powering millions of businesses. AWS offers 200+ services including compute (EC2), storage (S3), databases, AI/ML (Bedrock, SageMaker), and more. AWS is the world’s largest cloud provider with ~31% market share and $244B in remaining performance obligations (backlog).
Advertising — 10% of Revenue
Sponsored Products, Sponsored Brands, and display ads shown to shoppers on Amazon. This is essentially a toll on sellers who pay Amazon to surface their products. High-margin and growing rapidly at +22% year-over-year.
Prime Subscriptions — 7% of Revenue
Prime membership ($139/year or $14.99/month) provides free shipping, Prime Video, Prime Music, and other benefits. Over 200 million Prime members globally.
Income Statement Overview
| Metric | 2025 | 2024 |
|---|---|---|
| Total Revenue | $716.9B | $638.0B |
| Operating Income | $80.0B | $68.6B |
| Net Income | $77.7B | $59.2B |
Key Financial Metrics
- Operating Margin: 11.2% — Another record year. Amazon’s margin expansion continues as high-margin businesses (AWS, ads) grow faster than retail.
- AWS Operating Margin: 35.4% — AWS generated $45.6B in operating income on $128.7B revenue, accounting for 57% of Amazon’s total.
- Advertising Growth: +22.1% — Amazon’s ad business hit $68.6B, growing faster than any other major segment.
- Capital Expenditures: $128.3B — Massive investment in AI infrastructure, AWS data centers, and custom silicon (Trainium, Inferentia).
Is Amazon Profitable?
Yes, Amazon is profitable. The company reported net income of $77.7B on total revenue of $716.9B in FY2025. With an operating margin of 11.2%, Amazon demonstrates strong profitability for the e-commerce & cloud sector. Net income was boosted by $17.3B in non-operating income, primarily from an upward adjustment on Anthropic preferred stock ($7.7B) and gains on Rivian and Anthropic convertible notes.
What to Watch
- AI infrastructure spending — Amazon spent $128.3B in capital expenditures in FY2025, primarily on AWS data centers and custom AI chips (Trainium, Inferentia). AWS has a $244B backlog — execution on AI workloads is critical.
- Anthropic partnership — Amazon has invested billions in Anthropic, with its preferred stock now valued at $7.7B above cost. The convertible notes carry a fair value of ~$45.8B. The success of this AI bet will shape Amazon’s competitive positioning.
- Margin expansion — Operating margins hit 11.2%, up from 10.8% in FY2024. As advertising ($68.6B, +22%) and AWS become larger shares of revenue, further expansion is expected.
- FTC settlement fallout — Amazon settled the FTC lawsuit for $2.5B in Q3 2025. Watch for any operational constraints or follow-on regulatory actions.
- Trade and tariff risk — Amazon flagged potential impact from evolving U.S. trade policies and tariffs on goods sourced internationally, which could pressure costs and pricing.
- International profitability — International operating income reached $4.8B in FY2025, up from $3.0B in FY2024. Sustained improvement here would drive significant value.
Amazon (AMZN) Financial Summary
Amazon (AMZN) is an e-commerce & cloud company that generated $716.9B in total revenue in fiscal year 2025. The company earned $77.7B in net income, making it profitable. Revenue grew 12.4% year-over-year, with advertising (+22.1%) and AWS (+19.7%) leading growth. For a deeper look at Amazon’s revenue breakdown, business segments, and financial performance, review the detailed analysis above.