Slowing Retail, Fierce Cloud: Amazon’s Profit-Heavy, Growth-Light Quarter
Back again for another quarter from the toll booth of eCommerce: Amazon. Sales grew at their slowest pace since Q1 2023, while the Services segment recorded the weakest growth in company history. Forward guidance highlighted continued uncertainty, stating that ‘our results are inherently unpredictable and may be materially affected by many factors, such as…tariff and trade policies…’ Despite sluggish top-line growth, both profits and margins improved significantly year over year and sequentially. While revenue growth was muted, profitability remains on an upward trajectory. Amazon did not “buy” this quarter.
Service sales continue to outpace the product sales yet sales clearly has slowed versus prior quarterly growth rates.
2. In previous quarters, Amazon’s sales growth was primarily driven by Advertising and Third-party Seller Services. This quarter, while Third-party Seller Services still contributed 17% to total revenue growth, the largest drivers were AWS and Online Stores, accounting for 34% and 22% of the growth, respectively.
3. Online sales made up just 37% of total revenue, reflecting Amazon’s strategic shift toward more profitable segments and large-scale vendors. This focus was further supported by strong growth in AWS and Advertising. Notably, Third-party Seller Services recorded their slowest growth rate since being reported as a separate line item. Despite currency exchange headwinds and higher-than-expected capital expenditures for 2025, the quarter stood out for its strong profitability.
Bottom Line: Several themes from last quarter persist: AWS remains a consistent growth engine, while Seller Central growth appears to be plateauing. Amazon continues to emphasize Vendor Central, prioritizing net PPM performance over vendor size, with a strong focus on brand strength. We continue to advocate for a hybrid approach that leverages both 1P (Vendor Central) and 3P (Seller Central) models to maintain operational flexibility and maximize profitability.
Thank you for the read,
Ryan