Amazon’s Latest Quarter: Retail Sales Snooze, AWS Retains Supremacy
Back again for another quarter from the toll booth of eCommerce: Amazon. This was clearly a focused quarter on profit vs revenue. Sales were up slightly on the product side yet margin was up dramatically due to terminations of Vendors to drive profitability and a slowing of advertising and third-party services revenue as AWS reigns supreme.
Revenue growth continues to stabilize with retail sales snoozing to a flat growth rate. Advertising and revenue from 3rd party sellers continues to slow each quarter as Amazon Web Services (AWS) reigns supreme with an impressive 3rd consecutive quarter of 19% growth. Keep in mind that the AWS business is 2-3x the size of Google and Microsoft’s competing services.
2. In more recent quarters, Amazon gained the majority of growth via Advertising and Third-party Seller Services. However, although Third-party Seller Services drove 22% of the revenue growth, the service grew a paltry 9% year over year. As mentioned last quarter, this signals that marketplace fee increases to merchants selling on their site have peaked. Advertising grew 18% year over year but only contributed 14% of the growth as online and AWS contributed 28% and 25% respectively.
3. Online sales barely accounted for 40% of the overall sales indicating a willingness on Amazon’s part to focus the business on PROFITABLE and large vendors offset by more lucrative AWS and Advertising growth. Aside from currency exchange headwinds and a CAPEX spend for 2025 that exceeded expectations, this quarter impressed in profitability.
Bottom Line: Whilst there was some growth in online (Jassy statements from April), AWS continues to be the gift that keeps on giving with plateauing growth from Seller Central. Specific to Sellers, we believe the pain of lower profitability and higher cost per click CONTINUES to make its’ way into reduced advertising and 3rd party seller fees. We continue to reiterate the need to run Amazon using a hybrid model of 1P Vendor Central and 3P Seller Central to ensure flexibility and profitability.
Thank you for the read and enjoy the weekend,
Ryan