Amazon is not just an online retailer. Its public results distinguish product sales from several service revenue streams, including third-party seller services, Amazon Web Services (AWS), advertising, and subscriptions. The mix and margins change, so use the latest investor report for figures rather than recycling a number from an older article.
The main revenue streams
First-party stores
Amazon sells products directly to customers through online and physical stores. Revenue is not the same as profit: inventory, fulfillment, delivery, and returns all carry costs.
Third-party seller services
Independent sellers use Amazon's store and may pay for selling-related services such as fulfillment. Amazon's results report these service revenues separately from its own product sales.
AWS
AWS sells cloud infrastructure and related services to organizations. It is reported as its own operating segment alongside North America and International.
Advertising
Brands and sellers pay for advertising across Amazon properties and other inventory. This is reported as an advertising-services revenue category.
Subscriptions
Prime and other subscriptions contribute recurring revenue, while also supporting shopping and entertainment usage. Avoid assuming a subscription's full fee is profit.
How the pieces reinforce one another
More selection can make the store more useful to customers. Customer traffic can attract sellers and advertisers. Fulfillment and technology investments support the shopping experience but require significant spending. AWS serves a different customer need while sharing Amazon's long-term emphasis on infrastructure and technology.
This is an explanatory framework, not a claim that every part of the business is equally profitable. Compare segment operating income and revenue categories in Amazon's current filings when making a financial decision.
Read the numbers carefully
- Use the reporting period and currency shown in the original filing.
- Separate gross merchandise sold by third parties from Amazon's recognized service revenue.
- Compare segment profit with segment revenue rather than treating company-wide margin as universal.