Amazon's Advertising Services Grow 24% YoY to $17.7 Billion
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 07 2026
0mins
Should l Buy AMZN?
Source: NASDAQ.COM
- Strong Advertising Growth: Amazon's advertising services achieved a 24% year-over-year growth in Q3, generating $17.7 billion in revenue, making it the company's fourth-largest revenue source and showcasing its robust competitive edge in e-commerce.
- Significant AWS Profit Contribution: Although Amazon Web Services (AWS) accounts for only 18% of total revenue, its 35% operating margin contributes 66% of overall operating profits, indicating the cloud segment's superior profitability compared to e-commerce.
- Overall Business Performance: Amazon's online stores, third-party seller services, advertising, and subscription services all reached new highs in Q3, and maintaining these levels could significantly boost stock prices in 2026.
- Cautiously Optimistic Market Outlook: Despite Amazon's price-to-earnings ratio of 29 indicating a valuation similar to its peers, analysts believe that continued growth in advertising and AWS could lead to substantial profit increases, potentially enabling better market performance in 2026.
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Analyst Views on AMZN
Wall Street analysts forecast AMZN stock price to rise
44 Analyst Rating
41 Buy
3 Hold
0 Sell
Strong Buy
Current: 210.570
Low
175.00
Averages
280.01
High
325.00
Current: 210.570
Low
175.00
Averages
280.01
High
325.00
About AMZN
Amazon.com, Inc. provides a range of products and services to customers. The products offered through its stores include merchandise and content it has purchased for resale and products offered by third-party sellers. The Company’s segments include North America, International and Amazon Web Services (AWS). It serves consumers through its online and physical stores and focuses on selection, price, and convenience. Customers access its offerings through its websites, mobile apps, Alexa, devices, streaming, and physically visiting its stores. It also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, Blink, and eero, and develops and produces media content. It serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through AWS, which offers a set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Significant Capital Expenditure Increase: Amazon is projecting capital expenditures of $200 billion in 2026, sharply up from $131 billion in 2025, reflecting the company's commitment to competing in the AI space and its confidence in future growth prospects.
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- Accelerated Revenue Growth: Amazon Web Services (AWS) saw a 24% year-over-year revenue surge in Q4 2025, reaching $35.6 billion, significantly up from 20% growth in Q3, indicating strong enterprise demand for generative AI applications driving data infrastructure modernization.
- Substantial Capital Expenditure Increase: Management expects capital expenditures to reach $200 billion in 2026, sharply up from $131 billion in 2025, reflecting Amazon's ambitious goals in AI and a significant financial commitment to infrastructure development.
- Diversified Revenue Support: Although Amazon's trailing-12-month free cash flow fell to $11.2 billion, its operating cash flow increased by 20% year-over-year to $139.5 billion, demonstrating strong performance in high-margin segments like advertising and subscriptions, enabling self-funding for AI infrastructure investments.
- Market Risks and Opportunities: Despite risks of waning market appetite for AI software, Amazon's diversified business model and robust operating cash flow present an attractive long-term investment opportunity, allowing investors to capitalize on the current stock price pullback for future growth.
See More
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- Amazon's Market Leadership: With a market cap of $2.3 trillion and over 1 million robots, Amazon has established the largest e-commerce and cloud computing business globally, enhancing customer loyalty through an efficient logistics network and AI technology, ensuring it remains competitive in a fierce market.
- Ongoing Investment in Cloud Computing: Amazon's capital expenditures in cloud computing are on the rise, particularly in AI infrastructure, aiming to capture growth opportunities in future cloud workloads, further solidifying its position as the world's largest cloud service provider.
- Apple's Ecosystem Advantage: With a market cap of $3.8 trillion and a gross margin of 47.33%, Apple attracts affluent customers through its high-end electronics and service ecosystem, creating a strong lock-in effect that drives high-margin recurring revenue growth.
- Attractiveness of Long-Term Investment: In uncertain market conditions, Amazon and Apple, with their robust business models and market leadership, emerge as core stocks worth long-term investment, capable of achieving sustained growth in the future.
See More
Amazon and Apple's Market Advantages
- Amazon's E-commerce Edge: Amazon has built an unparalleled logistics network that allows for delivery of goods within hours, enhancing customer loyalty and creating a strong moat in the e-commerce sector.
- Investment in Robotics: Amazon operates over 1 million robots globally and has acquired Fauna Robotics and RIVR, further solidifying its leadership in robotics while improving operational efficiency and delivery speed.
- Cloud Computing Leadership: Amazon's AWS remains the largest cloud service provider globally, with ongoing capital expenditures aimed at capturing the next generation of cloud workloads, ensuring its core position in the digital economy.
- Apple's Ecosystem Advantage: Apple attracts affluent customers through high-end electronics and locks them into its platform with high-margin services like cloud storage and payments, creating natural replacement cycles and sustained revenue growth.
See More
Significant Shift in Retail Investor Behavior Amid Geopolitical Tensions
- Retail Investor Caution: Since the onset of the Iran war, retail trading activity has dropped by 30%, indicating a significant loss of confidence among investors, which has exacerbated overall market volatility, with the S&P 500 and Nasdaq Composite each down about 4% since the conflict began.
- Significant Decline in Flows: According to JPMorgan Chase, retail flows fell to $3 billion on March 19, well below the 12-month average of $6.8 billion, reflecting increasing uncertainty among investors regarding future market conditions, which could impact liquidity and market stability.
- Market Response and Policy Expectations: While pension funds may rebalance their portfolios during market downturns, investor concerns about the war's impacts have led to reluctance in making large-scale stock purchases in the short term, potentially putting further pressure on the market and affecting overall economic recovery.
- Long-Term Investment Opportunities: Despite the current bearish sentiment, analysts suggest that companies like Nvidia and Microsoft, which possess strong earnings potential during the AI supercycle, may present attractive buying opportunities at lower valuations, advising investors to remain cautious and focus on P/E ratios and other valuation metrics.
See More
Retail Investor Caution Grows Amid Market Volatility
- Retail Investor Pullback: Research from JPMorgan indicates a 30% drop in retail trading activity during the week of March 12, with flows falling to $3 billion by March 19, significantly below the 12-month average of $6.8 billion, highlighting a growing caution among retail investors.
- Market Volatility Impact: Since the onset of the war in Iran, both the S&P 500 and Nasdaq Composite have declined approximately 4%, indicating a strong market reaction to geopolitical tensions, with retail selling exacerbating downward pressure on stocks.
- Changing Rate Expectations: The CME Fedwatch poll reveals a shift in interest rate expectations, with 64% of traders anticipating rates to remain between 3.5% and 3.75% by December 2026, and 31% expecting higher rates, reflecting increased uncertainty about the economic outlook.
- Investor Sentiment Shift: Warren Buffett's advice to
See More
Amazon's Stock Pullback Presents Investment Opportunity
- AWS Revenue Growth Accelerates: Amazon Web Services (AWS) saw a 24% year-over-year revenue surge in Q4 2025, reaching $35.6 billion, driven by strong demand for generative AI applications, which is pushing enterprises to modernize their data infrastructure and significantly boosting Amazon's profitability.
- Significant Capital Expenditure Increase: Amazon is projecting capital expenditures of $200 billion in 2026, sharply up from $131 billion in 2025, reflecting the company's commitment to competing in the AI space and its confidence in future growth prospects.
- Improved Cash Flow Situation: Although Amazon's free cash flow fell to $11.2 billion year-over-year, its operating cash flow increased by 20% to $139.5 billion, indicating strong cash generation capabilities across its diversified business, allowing it to fund infrastructure investments without heavily diluting shareholder equity.
- Long-Term Investment Appeal: Despite risks associated with a potential decline in market appetite for AI software, Amazon's diversified operations and robust operating cash flow make it an attractive investment opportunity following a 9% stock pullback, suitable for long-term investors looking to hold for the next decade.
See More
