Amazon Q3 Earnings Beat Estimates, AWS Growth Pushes Stock Higher

Amazon.com AMZN shares jumped more than 13% in extended trading on Thursday after the company delivered third-quarter 2025 earnings of $1.95 per share, which increased 36.4% from the year-ago quarter and beat the Zacks Consensus Estimate by 23.42%.Net sales of $180.1 billion rose 13.4% year over year, ahead of management’s guidance of $174-$179.5 billion and beat the Zacks Consensus Estimate by 1.29%. Top-line growth was driven by solid momentum across the North America and International segments alongside strong growth in the Amazon Web Services (“AWS”) segment. Excluding the $1.5 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 12% compared with the third quarter of 2024.The company's profitability metrics showed notable strength, with net income reaching $21.2 billion, up 38.2% year over year. This impressive net income growth was significantly boosted by pre-tax gains of $9.5 billion from Amazon's investments in Anthropic.Amazon.com, Inc. Price, Consensus and EPS Surprise Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. QuoteTop-Line Details of AMZNProduct sales (41.1% of sales) increased 9.6% year over year to $74.05 billion. Service sales (58.9% of sales) jumped 16.3% from the year-ago quarter to $106.1 billion. By segment, North America revenues (59% of sales) rose 11.2% from the year-ago quarter to $106.2 billion, which beat the Zacks Consensus Estimate by 1.47%. International revenues (22.7% of sales) gained 14% year over year to $40.8 billion, which beat the consensus mark by 0.5%.AWS revenues (18.3% of sales) rose 20.2% year over year to $33 billion, which beat the consensus mark by 2.01%. Cloud growth has been a key area of concern for the company, as it faces intensifying pressure from rivals Alphabet GOOGL-owned Google and Microsoft MSFT, which also reported quarterly results this week. Google’s cloud revenues increased 34% during the third quarter, while Microsoft Azure recorded growth of 40%.Strengthening relationships with third-party sellers remained another positive. In the reported quarter, sales generated by third-party seller services rose 12% on a year-over-year basis to $42.4 billion, which beat the Zacks Consensus Estimate by 1.48%.Sales from robust advertising services increased 24% year over year to $17.7 billion, which beat the consensus mark by 2.47%. The company announced partnerships allowing advertisers to buy ad space on Netflix NFLX, Spotify, and SiriusXM Media through Amazon Ads, expanding its advertising reach beyond its own properties. The strong performance in advertising reflected successful AI-powered optimization of the platform and growing market share in digital advertising, providing a high-margin revenue stream that supports investments in other parts of the business.AMZN experienced 7% year-over-year growth in its physical store sales, which were $5.57 billion in the reported quarter. The figure beat the consensus mark by 0.27%.The company’s online store sales were $67.4 billion, up 10% year over year. The figure beat the Zacks Consensus Estimate by 1.17%.Prime Services and Consumer Business PerformanceThe company's retail and consumer business demonstrated strong engagement and innovation. Rufus, Amazon's AI-powered shopping assistant, reached 250 million customers in 2025, with shoppers using Rufus showing 60% higher purchase completion rates. Amazon launched Help Me Decide, an AI feature helping customers select products using browsing activity, searches, shopping history, and preferences. Over 1.3 million independent sellers used generative AI tools to create high-quality product listings. The company also expanded Multi-Channel Fulfillment to sellers using Walmart, Shopify, and SHEIN, allowing brands to reach customers wherever they shop while leveraging Amazon's fulfillment network.Amazon's Prime services demonstrated robust momentum in third-quarter 2025, with subscription services revenues reaching $12.2 billion, representing 12% year-over-year growth from the prior year's $10.8 billion. The figure beat the consensus mark by 0.36%. Prime Video and entertainment offerings showed strong momentum with several highlights. The Summer I Turned Pretty Season 3 drew more than 70 million viewers globally through seven days post-finale, delivering global viewership growth exceeding Season 2 by 65%. Thursday Night Football on Prime Video averaged 15.3 million viewers, the best performance for TNF on any network in a decade and representing a 16% increase over the prior season. Amazon debuted NBA on Prime in more than 200 countries, delivering an average audience of 1.25 million viewers in the United States during the season-opening double header. This Zacks Rank #2 (Buy) company launched the reimagined Luna cloud gaming service at no additional cost to Prime members and continued rolling out Alexa+, which customers engage with twice as much as the original Alexa. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.AWS and AI Innovations in Q3Amazon's AI initiatives gained significant momentum during the quarter, representing a strategic priority across the company. The company launched Project Rainier, a massive AI compute cluster containing nearly 500,000 Trainium2 chips specifically designed to build and deploy Anthropic's Claude AI models. Trainium2, Amazon's custom AI chip, saw continued strong adoption and grew 150% quarter over quarter, becoming a multi-billion-dollar business that is now fully subscribed. In Amazon Bedrock, the company added new foundation models including those from OpenAI, DeepSeek, and Qwen3, as well as Anthropic's latest Claude models. The company also expanded access to Kiro, its agentic coding development environment, which attracted over 100,000 developers in the first days of preview and has more than doubled since.Operating DetailsOperating expenses were $162.7 billion, up 15% from the year-ago quarter. As a percentage of revenues, the figure expanded 130 basis points (bps) on a year-over-year basis to 90.3%.The cost of sales, fulfillment and technology and infrastructure expenses increased 9.5%, 12.2% and 30.2% year over year to $88.6 billion, $27.6 billion and $28.9 billion, respectively.Sales and marketing and other operating expenses were $11.6 billion and $2.8 billion, respectively. General and administrative expenses increased 6% to $2.87 billion.Operating income came in at $17.4 billion, flat compared to the same period last year. However, this figure included two substantial special charges, including $2.5 billion related to a legal settlement with the Federal Trade Commission (FTC) and $1.8 billion in estimated severance costs primarily related to planned role eliminations. Excluding these charges, operating income would have reached $21.7 billion, representing strong operational performance. As a percentage of revenues, the figure contracted 150 basis points (bps) on a year-over-year basis to 9.7%.North America segment operating income was $4.78 billion, down 15.4% from the year-ago quarter. The decrease in operating income was primarily attributable to the $2.5 billion FTC settlement charge, as excluding this item would have resulted in operating income of $7.3 billion.International segment operating income came in at $1.19 billion, down 7.8% from the year-ago quarter, with results also impacted by severance costs.AWS segment operating income was $11.43 billion, up 9.4% from the year-ago quarter, demonstrating the segment's ability to maintain strong margins even while investing heavily in AI infrastructure.Balance Sheet & Cash FlowAs of Sept. 30, 2025, cash and cash equivalents were $66.9 billion, up from $57.7 billion as of June 30, 2025.Marketable securities totaled $27.2 billion as of Sept. 30, 2025, down from $35.4 billion as of June 30, 2025.The long-term debt was $50.7 billion at the end of the reported quarter, down from $52.6 billion at the end of the previous quarter.Amazon's cash flow generation remained robust, with operating cash flow increasing 16% to $130.7 billion for the trailing 12 months compared to $112.7 billion in the prior-year period. However, free cash flow decreased significantly to $14.8 billion for the trailing 12 months from $47.7 billion due to a year-over-year increase of $50.9 billion in property and equipment purchases. This substantial capital investment reflects Amazon's aggressive expansion of AI infrastructure, with the company adding more than 3.8 gigawatts of power capacity in the past 12 months — more than any other cloud provider — to support growing demand for its cloud and AI services.GuidanceFor the fourth quarter of 2025, Amazon provided guidance reflecting continued growth expectations. The company anticipates net sales between $206 billion and $213 billion, representing 10% to 13% growth compared to the fourth quarter of 2024, with this guidance anticipating a favorable impact of approximately 190 basis points from foreign exchange rates. Operating income is expected to range between $21 billion and $26 billion compared to $21.2 billion in the fourth quarter of 2024.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks