Unrealized AI Investments Drag Amazon’s Income, But AWS And Ads Are Still Growing

Amazon’s third-quarter earnings missed the mark – but that isn’t how CEO Andy Jassy sees it.

“Our operating margins have long been strong on our core offering,” Jassy told investors during Amazon’s Q3 earnings call on Thursday, adding that they’re “rapidly improving on the AI side, too.”

Still, it’s hard to argue with the numbers: Amazon’s net income decreased to $20.7 billion from $21.2 billion last Q3.

Amazon’s Q3’s 2025 numbers look better because of $9.5 billion in pre-tax gains that the company accrued last year from its investments in AI startup Anthropic, according to Amazon’s earnings report. Without a similar windfall this year, the difference is stark.

But apparently, that explanation wasn’t enough to sway investors. Amazon stock dropped 7% in after-hours trading on Thursday.

Unsurprisingly, investors expect a company’s payout from AI investments to keep growing over time, and aren’t loving what they’re seeing. Still, Amazon certainly hasn’t slowed down its activity in this department. It reported cash flow of negative $42.4 billion over the past 12 months, compared to a positive cash flow of $14.8 billion last year.

Even if the comparison to last year’s AI gains isn’t great, AI is still the driving force behind nearly all of Amazon’s revenue increases this year.

For instance, AWS – which provides AI and cloud computing infrastructure – grew 39.3% year-over-year, its fastest growth rate in nearly five years.

AWS could grow into “a trillion-dollar revenue business in the next five to 10 years,” Jassy said, due to the surge in businesses running their core workloads on it.

Not all agents are created equal

As it becomes more focused on developing AI infrastructure, Amazon hasn’t lost sight of its ads business – though, of course, that’s built on AI now, too.

Amazon Ads revenue was up 12% year-over-year, totaling $19.6 billion.

Double-digit ad revenue growth is nothing to sneeze at. But the Q3 numbers lagged behind the rest of the year, with Amazon Ads reporting 22% growth in Q1 and 26% in Q2.

Jassy chalked up Q3’s slower growth to Amazon rescheduling Prime Day from Q3 to Q2. He also pointed to the fact that Q3 didn’t include any NBA games on Amazon Prime Video.

To spur future growth, Amazon is fleshing out its ads business with new agentic AI features, including Amazon Ads Agent (a merging of the Amazon Ads console and Amazon DSP), which was launched in September. The new platform allows advertisers to launch full-funnel campaigns and continually optimizes them once they’re live.

But while agentic AI is all the rage on the advertiser side, it hasn’t been fully embraced by the consumer side just yet.

“The natural question is whether agentic shopping from external horizontal agents is meaningfully impacting Amazon ads,” Jassy said, “and the answer is no.”

Agentic shopping is “still not great,” he added, and isn’t meaningfully more convenient than humans completing one-click orders themselves.

Still, Jassy tacitly acknowledged that agentic shopping is likely to take root down the line. “Few customers are doing much shopping this way yet,” he said – “yet” being the key word.