The Amazon business model makes money from five main sources: selling products itself, charging third-party sellers for commissions and logistics, selling advertising, collecting subscription fees such as Prime, and renting out cloud computing through AWS, with AWS producing most of the operating profit. Figures below come from Amazon’s own results, and I’ve noted where a secondary source differs.
The Short Answer
Retail brings the traffic, and cloud and advertising bring the profit.
- FY2025 net sales were $716.9 billion, up 12%, with operating income of $80.0 billion and net income of $77.7 billion
- By segment, North America was $426.3 billion, International $161.9 billion and AWS $128.7 billion, up 20%
- One secondary source gives FY2025 operating income as $80.2 billion, while Amazon’s release says $80.0 billion
- The low-margin retail business feeds a high-margin business in advertising and cloud
Where Q2 2026 Revenue Came From
The most recent quarter, ended 30 June 2026, shows the mix. Total net sales were $200.6 billion, up 20%.
- Online stores: $70.4 billion, up 15%, about 35% of sales
- Third-party seller services: $46.8 billion, up 16%, about 23%
- Advertising: $19.8 billion, up 26%, about 10%
- Subscription services: $13.7 billion, about 7%
- AWS: $42.2 billion, up 37%, about 21%
- The remainder, roughly $7 billion to $8 billion, is physical stores and other items, which is my arithmetic from the reported lines
Selling Products Itself
The online store is the original business and the biggest single line.
- Amazon buys goods and sells them directly, and sales for pickup at its physical stores are included in online stores
- The profit per sale is thin, because it competes on price and delivery speed
- Its value is in the traffic and customer data it brings to the rest of the business
- One secondary source puts the online store at about $269 billion in 2025
Third-Party Sellers
Amazon earns fees from the businesses selling on its platform.
- Third-party seller services include commissions, related fulfilment and shipping fees, and other services
- One secondary source says third-party sellers account for 61% of units sold
- Sellers pay for storage, packing and delivery, which turns Amazon’s logistics network into a revenue line
- Because Amazon doesn’t buy the stock, it carries less inventory risk than on its own sales
Advertising
Sellers pay to be seen, which is nearly pure margin on existing traffic.
- Advertising services brought in $19.8 billion in Q2 2026, up 26%
- Sponsored products are the largest offering and the key growth driver, according to the earnings analysis
- Brands bid for placement where shoppers are already looking to buy
- Amazon doesn’t disclose advertising profit, so I can’t state its margin
Subscriptions
Prime locks in repeat customers.
- Subscription services cover annual and monthly Prime fees plus digital video, audiobooks, music, e-books and other non-AWS subscriptions
- They brought in $13.7 billion in Q2 2026
- Prime also raises order frequency, which supports the retail and advertising lines
AWS
Cloud computing is the profit engine.
- AWS supplied 21.1% of Q2 revenue but 60.5% of operating income, according to one analysis
- AWS operating income was $16.6 billion, a margin of about 39%, against 7.9% for North America and 4.1% for International
- AWS sales grew 37%, its fastest in 18 quarters, to a $169 billion annualised run rate
- Trailing-twelve-month AWS revenue was $148.4 billion, with trailing operating income of $54.7 billion
How the Pieces Connect
The flywheel works because each part supports the others.
- Low prices and fast delivery bring shoppers
- Shoppers attract more third-party sellers, who pay fees and buy advertising
- Prime keeps customers returning
- AWS profits fund the investment in logistics and data centres
- Retail margins are thin by design, and the group relies on higher-margin lines to earn its profit
A Profit Number to Read Carefully
Headline profit in Q2 2026 isn’t operating performance.
- Net income was $62.6 billion, against $18.2 billion a year earlier
- Of that, $53.4 billion was a non-operating gain from revaluing Amazon’s stake in Anthropic, according to one analysis
- Operating income of $27.5 billion, up 43%, is the cleaner measure
- The same analysis says trailing free cash flow turned to a $7.6 billion outflow on about $169 billion of capital spending, as Amazon invests heavily
Risks
The model has real pressures.
- Heavy capital spending on AWS capacity weighs on free cash flow
- Retail margins are thin, so costs and competition matter
- Reliance on AWS for profit means a slowdown there would be felt across the group
- Revenue from sellers depends on sellers staying on the platform
FAQs
Q1. How does Amazon make money?
A. From online retail, third-party seller fees, advertising, Prime and other subscriptions, and AWS cloud services.
Q2. Which part of Amazon is most profitable?
A. AWS, which produced 60.5% of operating income in Q2 2026 on about 21% of revenue.
Q3. What was Amazon’s revenue in 2025?
A. $716.9 billion in net sales, up 12%, with $77.7 billion of net income.
Q4. Why was Q2 2026 net income so high?
A. Mainly a $53.4 billion non-operating gain from revaluing its Anthropic stake, not from operations.
Q5. Is Amazon’s retail business profitable?
A. Only thinly. North America’s operating margin was 7.9% in Q2 2026, and International’s was 4.1%.
