Amazon runs three big businesses under one roof. The first is its online store, where it sells products directly and also lets millions of third-party sellers list their own goods, taking a cut of every sale. The second is Amazon Web Services, known as AWS, which rents computing power, storage, and software tools to companies and governments around the world, charging them based on how much they use. The third is advertising, where brands pay to show up prominently in Amazon's store. Each of these streams feeds the others: more shoppers attract more sellers, more sellers attract more advertisers, and the data and infrastructure built for the store powers AWS. The diagram below traces where the money goes.
How Amazon Makes Money
flowchart LR
A["Consumers Shop Online
and In Stores"] -->|"$269.3B online
$296.3B products"| B["Product & Service Sales
$716.9B total"]
C["Third-Party Sellers
Use Amazon Platform"] -->|"$172.2B seller fees
and commissions"| B
D["Developers and Enterprises
Use AWS Cloud Services"] -->|"$128.7B AWS revenue"| B
E["Advertisers Place Ads
On Amazon Properties"] -->|"Advertising revenue"| B
B -->|"$360.2B gross profit
50.3% margin"| F["Operating Expenses
and Infrastructure"]
F -->|"$80.2B operating income
11.2% margin"| G["Reinvestment in
Fulfillment and Tech"]
G --> H["Faster Delivery,
Better Selection,
New Devices"]
H --> A
H --> C
H --> D
Five years of financial data tell a clear story of a business that stumbled, then found its footing. Revenue climbed from $469.8 billion in 2021 to $716.9 billion in 2025, a rise of more than 50% in four years. But raw revenue growth is not the whole story. In 2021 and 2022, free cash flow was deeply negative, meaning Amazon was spending far more on warehouses, technology, and infrastructure than it was generating after those costs. That changed sharply in 2023, when free cash flow turned positive at $32.2 billion. By 2025, operating cash flow had reached $139.5 billion. The turnaround came from two forces working together: AWS growing fast enough to carry heavy profit weight, and the retail operation finally becoming more efficient after years of costly expansion.
Revenue Growth ($ Billions)
Amazon's revenue has grown steadily each year, crossing $700 billion for the first time in 2025.
Gross margin has improved every single year in the dataset, rising from 42.0% in 2021 to 50.3% in 2025. That climb reflects a deliberate shift in what Amazon sells. When a third-party seller uses Amazon's platform and fulfilment services, Amazon books fees rather than the full product cost. When AWS sells cloud computing, it earns high-margin service revenue. Both streams carry far better margins than buying a television wholesale and shipping it to a customer. The mix is steadily shifting toward these higher-margin sources.
AWS grew 20% in 2025 and now represents 18% of total revenue, while generating a disproportionate share of operating profit at $45.6 billion.
There is one important flag in the 2025 numbers. Free cash flow dropped sharply, from $32.9 billion in 2024 to just $7.7 billion in 2025, even as operating cash flow kept climbing. The gap is explained by a massive jump in capital spending. Amazon spent $128.3 billion on physical infrastructure in 2025, up from $77.7 billion in 2024. The vast majority of that spending is directed at data centers to support AWS growth and artificial intelligence workloads. That is a deliberate bet, not a sign of distress. But it means the cash that shows up in operations is being ploughed back into the ground before it reaches free cash flow.
$128.3B
Capital expenditures in 2025, up from $77.7B in 2024, primarily for AWS data center expansion
What Is Free Cash Flow?
Free cash flow is the money left over after a company pays for everything it needs to keep running and growing, including buildings and equipment. When free cash flow is negative, a company is spending more than it earns in cash. When it is positive, cash is building up. A company can have rising profits but falling free cash flow if it is investing heavily in new capacity.
Amazon's net debt position flipped from positive to negative over this period. In 2021, net debt stood at $12.5 billion, meaning the company owed more than it held in cash. By 2025, that figure had reversed to negative $21.2 billion, meaning Amazon holds more cash and liquid assets than it owes. The company reported cash, equivalents, and marketable securities of $123.0 billion as of December 31, 2025. That cushion matters because the company is about to spend even more: it has signalled that capital expenditures will increase again in 2026.
2023
milestone
Free Cash Flow Turns Positive
After two consecutive years of deeply negative free cash flow, totalling a combined loss of more than $31 billion, Amazon swung to $32.2 billion of positive free cash flow in 2023. Operating cash flow nearly doubled from $46.8 billion in 2022 to $84.9 billion in 2023. This shift marked the moment AWS profitability and retail efficiency gains began outrunning the cost of Amazon's infrastructure build-out.
The risks Amazon faces are specific and documented. Governments in China and India impose rules that limit how Amazon can operate in those countries. China requires Amazon to use third-party companies to hold certain technology licences. India restricts foreign ownership of online retail businesses. Either country could change its rules without warning, forcing Amazon to restructure or exit those markets. Separately, Amazon relies on a small number of suppliers for the graphics processing units it needs to run artificial intelligence workloads. If those suppliers cannot deliver enough chips, Amazon's ability to build and sell AI services could be severely damaged. These are not abstract worries. The company names both as high-severity risks in its filing.
Amazon also faces open government investigations in multiple countries claiming its operations violate competition and consumer protection laws. In 2025, Amazon settled a lawsuit with the Federal Trade Commission, recording a $2.5 billion charge in the third quarter. That settlement is resolved, but other investigations remain open. Regulators could still force Amazon to change how it runs its store, its fulfilment network, its Prime membership programme, or AWS. A forced restructuring of any of those would directly affect revenue and profit. On top of that, Amazon stores and processes enormous volumes of customer and seller data. A significant data breach could trigger lawsuits, regulatory fines, and a loss of customer trust that would be hard to rebuild.
$2.5B
Charge recorded in Q3 2025 to settle a lawsuit with the Federal Trade Commission
What Is Cloud Computing?
Cloud computing means renting access to computers, storage, and software over the internet instead of owning the hardware yourself. A company can use as much or as little as it needs and pay only for what it uses. AWS is one of the largest providers of this service in the world, competing mainly with Microsoft Azure and Google Cloud.
AWS is growing at 20% per year and produced $45.6 billion in operating income in 2025 alone. That profit engine is what funds everything else: the retail expansion, the fulfilment network, the satellite broadband project, the investment in Anthropic, and the massive data center build-out now underway. If AWS slows, the entire financial equation shifts. The retail business still requires enormous spending to maintain, and advertising revenue, while growing, depends on continued shopper traffic. AWS is not a side project. It is the load-bearing wall.
Amazon invested $2.7 billion in Anthropic in 2025, a company building large artificial intelligence models. The value of that stake was marked up significantly during the year, contributing to a $15.2 billion gain in other income. That gain is a financial event, not operating revenue, and may not repeat.
The Bet
AWS keeps growing fast enough, for long enough, to justify the $128.3 billion in capital Amazon spent in 2025 and the even larger amounts it plans to spend in 2026. The logic only works if enterprise and government demand for cloud computing and AI infrastructure keeps expanding, and if Amazon can translate that infrastructure into durable, high-margin service contracts before competitors match its capacity. If demand softens, or if the AI wave produces less lasting cloud usage than expected, Amazon will be sitting on an enormous, expensive infrastructure build with less revenue to show for it than the spending assumed.
Open question
Amazon has $123 billion in cash and liquid assets, a growing advertising business, and an AWS operation generating $45.6 billion in annual operating income. It is also spending at a pace that has never been seen before in its history, with capital expenditures jumping 65% in a single year. The free cash flow that appeared in 2023 and 2024 has nearly vanished again, consumed by the infrastructure build. Will the AI and cloud infrastructure Amazon is building today produce enough lasting revenue to justify the scale of spending, or is the company running ahead of actual demand in ways that will only become clear years from now?
Compiled · 10-K · FY2025
International Operations and China/India Regulatory Risk
Amazon's operations in China and India face unique regulatory risks. China requires Amazon to use third-party companies to hold licenses for certain technology services, and India restricts foreign ownership of online retail businesses. Both countries could change their regulations or interpret existing ones differently, potentially forcing Amazon to restructure operations, lose licenses, or shut down entirely in these countries.
Semiconductor Supply Constraints
Amazon relies on a limited group of suppliers for semiconductor products, especially graphics processing units needed for artificial intelligence infrastructure. If these suppliers cannot provide enough products, Amazon's ability to develop and operate artificial intelligence technologies and services could be severely damaged.
Government Investigations and Antitrust
Amazon faces multiple open government investigations claiming its operations violate competition and consumer protection laws, including how it runs its stores, fulfillment network, Prime service, and AWS cloud services. If regulators rule against Amazon, the company could face major fines, be forced to change how it operates, lose the ability to offer certain services, or suffer serious damage to its reputation.
Data Security and Third-Party Systems
Amazon collects and stores massive amounts of customer and business data. If Amazon or its third-party vendors experience data breaches, hacks, or security failures, customers and sellers could lose sensitive information, Amazon could face lawsuits and regulatory penalties, and people might stop using Amazon's services.
Fulfillment Network and Inventory Complexity
Amazon's fulfillment network and data centers are extremely complex. If Amazon fails to accurately predict customer demand or properly manage inventory and staffing, the company could have too much or too little warehouse space, experience service outages, incur higher shipping costs, or face customer dissatisfaction.
10-K Item 1A · Risk Factors
