How Amazon Makes Money

Product sales, advertising, subscription services, and cloud services

Reviewed by David Kindness

Amazon.com Inc. (AMZN), the world’s largest online retailer, has grown rapidly in a broad range of businesses, including its core ecommerce operations, cloud services, and digital advertising. It also sells products such as the Alexa personal assistant and ecosystem, Kindle e-reader, Fire TV, and movies and television shows through its Amazon Prime Video platform. Amazon’s rivals include Walmart Inc. (WMT) and Alibaba Group Holding Ltd. (BABA).

Key Takeaways

• Amazon makes money through its retail, subscriptions, and web services, among other channels.
• Retail remains Amazon’s primary source of revenue, with online and physical stores together accounting for the biggest share.
• Amazon Web Services (AWS) currently generates the majority of Amazon’s operating profits and is growing at a robust pace.

Amazon’s Financials

Amazon ranks as one of the world’s top companies by market value. As of May 2024, Amazon has a market capitalization of $1.95 trillion.

The company posted net income of $30.4 billion in fiscal year (FY) 2023. The fiscal year ended December 31, 2023. Net income increased from a lost of $2.7 billion the previous fiscal year.

Revenue, which Amazon calls net sales, rose 12% year over year (YOY) to $574.79 billion, compared with $513.9 billion in in 2022 FY. Operating income, which the company uses as a profitability metric for its business segments, increased to $36.85 billion, compared with $12.25 billion in FY 2022.

Amazon’s Business Segments

Amazon divides its business into three segments: North America, International, and AWS (Amazon Web Services). The first two of these segments, North America and International, refer to geographical breakdowns of Amazon’s retail business. They generate revenue from retail sales in North America and the rest of the world, as well as from subscriptions and export sales for those areas.

Retail can be broken down further into online stores, comprising the bulk of sales, and physical stores. Company-wide, online stores accounted for $231.8 billion in sales in FY 2023, while physical stores generated $20.03 billion in sales. Net sales increased 12% compared with the third quarter of the previous year.

North America

Amazon’s North America segment dominates its net sales, accounting for $352.83 billion. That is a 12% increase from FY 2022 and comprises about 61% of the company’s net sales. The segment posted an operating gain of $14.48 million, compared with operating loss of $2.8 million in the previous fiscal year.

International

Amazon’s International segment consists of Amazon’s retail business for consumer products and subscriptions for internationally focused online stores. It also includes export sales from those stores, but not those from North America-focused online stores. The segment reported an operating loss of $2.66 billion in FY 2023, an improvement from the previous year’s loss of $7.75 billion.

Amazon Web Services (AWS)

Amazon Web Services (AWS), launched in 2006, provides cloud services to businesses, government agencies, and academic institutions to store information and deliver content. AWS provides an infrastructure platform in the cloud for a variety of solutions such as hosting applications and websites, providing enterprise information technology (IT), and content delivery.

Amazon’s AWS segment generated net sales of $90.77 billion and operating income of $24.63
billion in FY 2023. Net sales increased 13%, excluding changes in foreign exchange rates, and operating income rose by $1.79 billion compared with the previous fiscal year.

Although net sales from AWS are below net sales for the North America segment and International segments, AWS’s operating income is substantially higher. The AWS segment accounts for about 16% of total net sales. Because the other two segments posted operating losses in the third quarter, AWS accounts for all of the company’s operating income.

Amazon controls about a third of the global cloud market, substantially more than its next closest competitor. AWS’s biggest rivals are Microsoft Corp.’s (MSFT) Azure and Alphabet Inc.’s (GOOGL) Google Cloud.

Amazon Furthers its Push into Healthcare

From telehealth to cancer research, Amazon has made a push into healthcare since 2018 by amassing healthcare businesses. The company is offering a new $5 monthly subscription service for U.S. Prime members.

The subscription service, called RxPass, launched on January 24, 2023 and provides access to commonly prescribed generic medications that treat more than 80 health conditions. The company reports that Amazon pharmacists or support staff will be available at all times to discuss medications and coordinate with a patient’s doctor.

How Amazon Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Amazon and its commitment to diversity, inclusiveness, and social responsibility. We examined the data that Amazon releases to show you how it reports the diversity of its board and workforce, to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Amazon discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Amazon breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.

What is Amazon’s main business?

Amazon divides its business into three segments: North America, International, and AWS (Amazon Web Services). “North America” and “International,” refer to geographical breakdowns of Amazon’s retail business. These two business segments generate revenue from retail sales, subscriptions, and export sales. AWS provides cloud services to businesses, government agencies, and academic institutions to store information and deliver content.

Is Amazon the biggest company in the world?

Amazon ranks as one of the world’s top companies by market value and revenue. As of May 2024, Amazon has a market capitalization of $1.95 trillion and reported $590.74 billion in revenue. For context, the biggest companies by revenue in the world today are worth a few trillion dollars This makes these companies larger and more valuable than some countries’ entire economies.

How does Amazon make most of its money?

Retail is Amazon’s primary source of revenue, with online and physical stores together accounting for the biggest share. In FY 2023, Amazon reported $574.79 billion in retail sales. Of those, $352.83 billion belong to its North America business segment and $131.2 billion to its international business segment.

The Bottom Line

Amazon ranks as one of the world’s top companies by market value. As of May 2024, Amazon had a market capitalization of $1.95 trillion. The company posted net income of $30.4 billion in 2023 fiscal year (FY). The fiscal year ended December 31, 2023. Net income increased from a $2.7 billion loss in the previous fiscal year. Amazon divides its business into three segments: North America, International, and AWS (Amazon Web Services).

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