Amazon’s ad business grows 24% to $17.7 billion in Q3 as cloud beats expectations
Amazon’s ad business surged 24% to $17.7 billion in Q3 2025, emerging as a key profit driver alongside AWS despite softer retail momentum.
ADVERTISEMENT
Amazon delivered a strong Q3 2025 performance, underpinned by robust growth in its advertising and cloud-computing businesses, even as some segments such as retail face headwinds heading into the holiday season. Advertising revenue was one of the clear bright spots for Amazon in the quarter. The company reported ad sales of $17.7 billion, up 24% year-on-year.
This growth highlights how Amazon is increasingly positioning its ad business as a high-margin revenue stream, complementing its traditional retail and cloud operations.
Notably, during the earnings call, CEO Andy Jassy remarked: “I think there are multiple places where we can expect to continue to grow … referring to advertising and retail sales.”
This signals Amazon’s intention to lean into advertising as a strategic pillar.
Meanwhile, the company’s cloud unit, Amazon Web Services (AWS), grew revenue by approximately 20% year-on-year — its fastest pace in nearly three years.
This growth helped offset softer momentum in the e-commerce business, which is increasingly under pressure from weak consumer confidence, global trade headwinds and heightened logistics and fulfilment costs.
For the quarter ended September 30, 2025:
Total net sales rose ~13% to $180.2 billion, compared with ~$158.9 billion in the prior year’s quarter.
Operating income held steady at $17.4 billion, despite significant charges including a ~$2.5 billion regulatory settlement and ~$1.8 billion in severance. Excluding those items, operating income would have been ~$21.7 billion.
The company guided Q4 net sales in the range of $206 billion to $213 billion, slightly above analyst expectations of ~$208.1 billion.
Why Advertising Matters
While AWS remains Amazon’s largest profit engine (accounting for roughly 60% of the company’s operating income), the advertising business is increasingly important for several reasons:
High Margin: Advertising tends to have lower incremental costs compared with physical-goods retail, making growth in this segment disproportionately beneficial to margins.
Platform Leverage: Amazon’s massive e-commerce platform gives it rich shopper data and a captive audience for advertisers — a competitive differentiator in retail media.
Diversification: With retail growth slowing amid macro uncertainty, advertising provides Amazon a way to diversify and reduce reliance exclusively on product sales.
Growth Tailwinds: The ad business is still at a smaller scale than Amazon’s core retail or cloud segments, so sustained growth (in the 20-25% range) can materially move the needle over time.
Risks & Considerations
The broader retail environment remains soft, which could drag on ad spend tied to consumer demand.
Amazon’s advertising business, while growing, must contend with regulatory scrutiny around data privacy and the platform’s dual role as retailer and ad host.
Execution risk: Amazon must convert advertiser interest into monetisation across new formats (e.g., streaming, devices, in-store) to keep growth going.
Macro pressures: If consumer spending weakens, advertisers may pull back, which would flow through to Amazon’s ad business and make its growth vulnerable.
Outlook
Advertising will remain a key piece of Amazon’s growth story in 2026 as much as AWS does. In the near term, investors will be watching for:
The growth rate of advertising revenue in Q4, and how that compares with the ~24% achieved in Q3.
Margins on the ad business and how they compare to retail and cloud.
Commentary on new ad placements (e.g., devices, streaming, in-store) and how Amazon is monetising them.
The interplay between retail weakness and ad spend – i.e., whether a weak consumer weakens both sides simultaneously.
While AWS remains the engine driving Amazon’s profitability, the advertising business is shaping up as a meaningful growth lever — one that Amazon is visibly leaning into. With ad revenue growing at ~24% and total revenue up 13%, Amazon’s ability to sustain and ideally accelerate advertising growth could be pivotal to its medium-term trajectory.
