Originally a small online bookstore started by Jeff Bezos, Amazon (AMZN 1.53%) has grown into a global e-commerce and cloud computing giant with diverse, ever-expanding operations.
This has, broadly speaking, been a banner year for the company despite continued uncertainty in the general economic landscape. Key segments like the cloud computing business Amazon Web Services (AWS) have delivered robust financial growth, while more nascent segments like advertising are continuing to grow rapidly.
Amazon has continued to intensively focus on developing and deploying artificial intelligence (AI) and robotics to keep pace with technological innovation across its vast operations network and in customer-facing products. For example, the company has integrated over a million robots into its facilities to work alongside employees as it aims to boost productivity, improve safety, and accelerate delivery speeds.
If you want to know how Amazon makes money, how it's doing financially, and more recent developments with the company, keep on reading.
Image source: Getty Images.
What does Amazon do?
Amazon's best-known business is its online marketplace, often called the "everything store," because it sells a massive selection of products, from books and electronics to home goods and clothing. It functions both as a direct retailer (selling its own inventory and private labels like Amazon Basics) and as a platform for millions of third-party sellers. The company boasts a fast-growing advertising business too, where sellers and brands pay to have their products featured prominently on the Amazon website.
Amazon has built a vast, advanced logistics and delivery network, including fulfillment centers and a fleet of delivery vehicles, to manage and ship products efficiently across the globe. AWS is Amazon's most high-margin segment and a major part of its business. AWS provides cloud infrastructure services (such as computing power, storage, and databases) to businesses, government agencies, and developers globally, and powers many other companies' websites and apps.
AWS is used extensively for a wide variety of AI and machine learning (ML) workloads, from development and training to deployment and scaling. Amazon is developing its own custom AI chips, Trainium and Inferentia, which offer greater efficiency and lower costs for training and running AI models compared to general-purpose GPUs.
The Prime membership program offers customers a combination of benefits, including fast, free shipping (often one-day or same-day), access to streaming entertainment (Prime Video, Amazon Music), exclusive deals, and other perks. Amazon also creates and provides access to a wide array of entertainment through subsidiaries and services like Prime Video, Amazon Music, Audible (audiobooks), Twitch (live streaming), and Amazon MGM Studios (movie and TV production).
Amazon develops and sells popular hardware devices, including the Kindle e-reader, Echo smart speakers (with the Alexa voice assistant), Fire tablets, and Ring home security products. Amazon also has a physical retail footprint, thanks to its acquisition of Whole Foods Market, as well as its own Amazon Fresh grocery stores and Amazon Go convenience stores.
NASDAQ: AMZN
Key Data Points
How does Amazon make money?
E-commerce sales from online stores on the flagship Amazon platform remain the company's largest single source of revenue. Amazon also earns significant revenue by allowing independent sellers to list and sell their products on its marketplace. This includes commissions on sales, as well as fulfillment, shipping, and storage fees (known as Fulfillment by Amazon or FBA).
AWS accounts for a smaller percentage of overall revenue compared to online stores, but it is Amazon's most profitable division and generates the majority of the company's operating income. The majority of AWS revenue comes from fundamental infrastructure services like compute, storage, and networking that operate on a "pay-as-you-go" model where customers are charged based on their actual consumption of resources.
Amazon's advertising business generates revenue primarily through a pay-per-click model for targeted ad placements like sponsored products, sponsored brands, and sponsored display ads. Its advertising success stems from leveraging vast proprietary customer data to offer highly effective ad targeting both on and off its platforms.
Amazon's ad business is expanding beyond its core e-commerce platform and is integrating placements across its entire ecosystem, including Prime Video, Fire TV, and Twitch, to create a comprehensive, closed-loop advertising solution for brands.
The company also derives core revenue streams from sources including membership fees from Amazon Prime, its physical stores, and a variety of other ventures, such as sales of its own branded electronic devices or direct prescription sales from Amazon Pharmacy.
Amazon's financials
Amazon recently reported impressive third-quarter 2025 financial results, with net sales increasing 13% to $180.2 billion and AWS revenue accelerating 20% year-over-year to $33 billion. Amazon's operating income was flat year over year and was impacted by significant one-time charges, including a legal settlement with the Federal Trade Commission and severance costs related to layoffs.
Amazon reported net income of $21.2 billion in the third quarter, which was a 38% increase from one year ago. Amazon's free cash flow decreased significantly in Q3 2025 due to a massive increase in capital expenditures for AI infrastructure and data centers. The company's operating cash flow grew 16% year over year, which reflects the fact that its strong core performance is being somewhat overshadowed by these large, long-term investments in property and equipment.
Recent developments
Amazon has increased its full-year capital expenditure forecast for 2025 to around $125 billion, primarily to power the AI capabilities of its AWS division. AWS and OpenAI have signed a landmark $38 billion multi-year deal for cloud computing capacity, including access to hundreds of thousands of Nvidia GPUs. This strategic partnership provides OpenAI with massive computing power for its AI workloads, such as training future models and running ChatGPT, and helps establish AWS as a leading provider of AI infrastructure in a competitive field against rivals like Microsoft and Alphabet's Google.
The company has also made a total investment of $8 billion in the AI start-up Anthropic (creators of the Claude chatbot), which has made AWS its primary cloud provider and training partner. This partnership also involves Anthropic using AWS chips like Trainium and Inferentia for training and deploying its AI models. Amazon just opened a dedicated $11 billion AI data center in Indiana, and plans a $20 billion investment in Pennsylvania for similar cloud and AI infrastructure expansion.
