Amazon’s Ad Businesses Helped Fuel Blockbuster Quarter

Amazon blew past Wall Street expectations in its third-quarter earnings report, driven by a resurgence in its AWS cloud division and relentless growth in its advertising business. The company posted revenue of over $180 billion and a net income of over $21 billion, signaling strong momentum heading into the holiday season.

• The cloud re-accelerates: The big story is the rebound of Amazon Web Services, with sales jumping 20% to $33 billion, marking its strongest growth rate since 2022. CEO Andy Jassy credited the acceleration to strong demand for both core infrastructure and new AI workloads. To keep up, Amazon is pouring money into an infrastructure build-out, adding nearly 4 gigawatts of power and launching "Project Rainier," a supercomputer cluster for AI development.

• Not just a side hustle: Meanwhile, Amazon's ad business continued its torrid pace, surging 24% to nearly $18 billion. The jump is being fueled by new partnerships with major players like Netflix, Spotify, and SiriusXM, turning Prime Video and other Amazon properties into must-buy advertising real estate.

• Growth has its price: But the stellar top-line numbers mask some turbulence under the surface. The quarter's operating income was flat at $17.4 billion, a figure that includes a hefty $2.5 billion settlement with the FTC over deceptive Prime subscription tactics and another $1.8 billion in severance costs. The company's heavy spending on AI ambitions also took a toll on free cash flow, which plummeted nearly 70%.

Jassy is betting that AI will fundamentally reshape e-commerce through what he calls "agentic commerce." He predicts that as AI agents get better at guiding online shopping, they will unlock a new wave of online spending. "That’s really good for customers, and I think it’s really good for Amazon," Jassy said, "because at the end of the day, you’re going to buy from the outfit that allows you to have the broadest selection, great value, and continues to deliver for you very quickly and reliably.”