How Amazon Makes Money

Amazon.com Inc., the world’s largest online retailer, has grown rapidly in a broad range of businesses, including its core e-commerce 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).

Amazon’s Financials

For Q1 2024, Amazon (AMZN) posted total net sales of $143.3 billion; an increase of 12.5% from the same period in 2023. The company posted a net income of $10.4 billion; an increase of 228.8%. The increase in net income comes from a growth in net sales without as large of a growth in operating expenses; in short, the company was able to grow net sales while keeping operating expenses down.

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, advertising, and export sales for those areas. The AWS segment consists of Amazon's cloud services business.

Retail can be broken down further into online stores, comprising the bulk of sales, and physical stores. Company-wide, online stores accounted for $54.7 billion in sales in Q1 2024, while physical stores generated $5.2 billion in sales.

North America

The North America segment consists of retail sales from consumer products, advertising, and subscription services in North America-focused online and physical stores.

Amazon’s North America segment dominates its net sales, bringing in $86.3 billion for Q1 2024. That is a 12% increase from the same period in 2023. North America net sales made up about 60% of the company’s total net sales in Q1 2024. The segment posted an operating income of $5 billion; an increase of 455% year-over-year (YOY). The segment made up 32.6% of the total company operating income for the quarter.

International

Amazon’s International segment consists of Amazon’s retail business for consumer products, advertising, and subscriptions for internationally focused online stores.

The International segment brought in sales of $31.9 billion for Q1 2024; an increase of 9.7% YOY and making up 22% of company net sales. The segment had an operating income of $903 million, which was a significant increase from the $1.2 billion loss from the same period in 2023. The segment made up 5.9% of the company's operating income for Q1 2024.

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 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’s AWS segment generated net sales of $25 billion for Q1 2024; an increase of 17.2%. It accounted for 18% of total net sales. Operating income for the segment was $9.4 billion; an increase of 83.9%. The segment accounted for 61.5% of operating income in Q1 2024.

Amazon's Recent Developments

From telehealth to cancer research, Amazon has made a push into healthcare since 2018 by amassing healthcare businesses and launching Amazon Pharmacy.

The subscription service, called RxPass, launched on Jan. 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.

In June 2024, Amazon announced that AWS would be providing two AI certifications, focused on AI and machine learning, so individuals can grow those skills and be competitive in the marketplace for jobs.

In June 2024, Amazon announced that its Counterfeit Crimes Unit (CCU) took action to dismantle illegal online schemes that were intended to evade Amazon's product approval process. The unit filed six lawsuits against these perpetrators.

The Bottom Line

Amazon ranks as one of the world’s largest companies by market cap. It dominates the retail space and has grown significantly since its founding as the Internet boomed and people began shopping online. While Amazon started by selling books, it has branched out into selling almost every type of consumer product, as well as offering media services, cloud services, and more.