Amazon executive Andy Jassy showcases the company's advertising capabilities
Amazon's Advertising Business Soars as AWS Cloud Services Slow Down
In a significant shift, Amazon's advertising business is rapidly expanding and becoming a key profit engine for the tech giant, according to CEO Andy Jassy. The advertising segment is expected to exceed $60 billion in revenue in 2025, making it one of the world's largest media companies by revenue.
This growth is noteworthy, as Amazon's advertising revenue hit about $15.7 billion in Q2 2025, marking a 22% year-over-year increase. The company's ad strategy leverages multiple digital channels, including its own properties like Prime Video, Twitch, Fire TV, and live sports, and extends off-platform through partnerships with companies like Roku and Disney.
In comparison, Amazon Web Services (AWS), while still dominant in cloud computing, has experienced a slower growth rate of about 17.5% year-over-year as of mid-2025. AWS's annualized revenue run-rate exceeded $120 billion, but lags behind competitors like Microsoft Azure (26% growth) and Google Cloud (32%).
Amazon's advertising segment is seen as highly profitable, with estimated EBIT margins of 35–40%, rivaling or even surpassing those of Alphabet and Meta. Advertising also contributed over half of Amazon’s total operating income at about $10.2 billion in one quarter of 2025.
Meanwhile, AWS remains Amazon’s marquee business by revenue and market leadership, underpinning the company’s overall scale. The advertising segment benefits from the synergy with Amazon's retail marketplace, where increased sellers spur more ad spending, creating a reinforcing revenue loop.
Diversifying Amazon's Business
As Amazon's advertising business flourishes, the company is also looking to expand into other areas. Amazon is interested in expanding its business in grocery, health, and international markets. The company has improved its machine learning algorithms to better predict customer needs and have the right inventory in the right regions at the right time.
However, Prime delivery, one of Amazon's signature services, slowed down significantly after the height of the pandemic. Prime membership currently costs $139 per year for regular members, and $69 for students. Prime membership is plateauing in the U.S., but free one-day delivery nationwide is available on 20 million items with no minimum purchase.
Delivery costs and rates may vary depending on an item's size and weight. Amazon has pivoted from a national to a more regional fulfillment network, doubling its fulfillment center footprint and accelerating the development of its last-mile transportation and sortation center networks in response to the growth.
The company has also started charging some customers for select returns made to The UPS Store locations. The Container Store's chief merchant has left the company, but Buy with Prime increases shopper conversion on third-party sites by 25% on average.
Despite these changes, Amazon's advertising business and AWS cloud services continue to shape the company's future, with advertising playing an increasingly important role in its profitability and diversification efforts.
References:
- Amazon's Advertising Business Hits $15.7 Billion in Q2 2025
- AWS Growth Slows to 17.5% Year-over-Year in Mid-2025
- Amazon Advertising to Exceed $60 Billion in Revenue in 2025
- AWS Focuses on AI-Driven Cloud Services
- Amazon's Ad Strategy Leverages Data and Creative Content
- 80% of Global Retail Market Segment Share Still in Physical Stores
- Prime Membership Costs and Benefits
- Amazon's Fulfillment Network Shifts to Regional Strategy
- Amazon Charges for Select Returns at The UPS Store
- Buy with Prime Increases Shopper Conversion on Third-Party Sites
