Is Amazon Profitable Without AWS? A Detailed Profit Breakdown

Amazon is often associated with its massive e-commerce presence, but a significant portion of its profits comes from Amazon Web Services (AWS). This raises questions about whether the company’s core retail and other business segments are profitable on their own.

To understand this, it’s essential to break down Amazon’s earnings across different divisions, including retail, subscriptions, advertising, and AWS.

Core Retail and Marketplace Business

Amazon’s retail operations follow two primary models: first-party (1P) sales, where Amazon buys inventory and sells it directly, and third-party (3P) marketplace sales, where independent sellers list products on the platform. Third-party sales now account for nearly 60% of total units sold, a shift that benefits Amazon financially. Unlike first-party sales, which require inventory management and logistics, third-party sales generate revenue through seller fees without the same overhead costs.

Fulfillment and logistics are central to Amazon’s retail business. The company has invested heavily in warehouses, robotics, and last-mile delivery, improving efficiency but also increasing expenses. Fulfillment costs alone exceeded $90 billion in 2023. To offset these expenses, Amazon offers Fulfillment by Amazon (FBA), where third-party sellers pay to store, pack, and ship their products through Amazon’s network.

Amazon’s pricing strategy also affects profitability. The company often sells first-party products at low margins to attract customers and drive repeat purchases. While this keeps prices competitive, it limits direct retail profitability. However, the high volume of traffic benefits the third-party marketplace, which is more profitable due to seller fees and fulfillment services.

Subscription Services

Amazon’s subscription revenue provides a stable and profitable income stream. The most significant contributor is Amazon Prime, which offers benefits like free shipping, Prime Video, and exclusive deals. With over 200 million global subscribers, Prime generates billions in annual revenue. Prime members also shop more frequently, increasing their lifetime value to Amazon.

Beyond Prime, Amazon has expanded into digital content subscriptions, including Kindle Unlimited, Audible, and Amazon Music Unlimited. Kindle Unlimited operates on a revenue-sharing model with authors, allowing Amazon to offer a vast book library without traditional inventory costs. Audible follows a similar model, offering both à la carte purchases and subscription-based access to audiobooks.

Amazon also offers business-oriented subscriptions, such as Amazon Business Prime, which provides bulk purchasing benefits and analytics tools for corporate customers. AWS-related subscriptions, including premium support plans, add another layer of recurring revenue.

Advertising Revenues

Amazon’s advertising business is among its most profitable segments, leveraging vast consumer data to offer highly targeted marketing solutions. Unlike traditional digital advertising, which relies on third-party cookies, Amazon’s platform uses first-party data from user searches, purchase history, and browsing behavior. This allows advertisers to reach consumers at the moment they are considering a purchase, making Amazon’s ads highly effective.

Most ad revenue comes from Sponsored Products, Sponsored Brands, and Sponsored Display ads, which allow sellers to promote their listings within search results and product pages. These ads operate on a pay-per-click model, meaning Amazon earns revenue regardless of whether a sale occurs. As competition for visibility increases, cost-per-click (CPC) rates have risen, driving higher ad spending from sellers.

Amazon has also expanded into video and streaming ads through Freevee, Prime Video, and Twitch. In early 2024, Prime Video introduced an ad-supported tier, positioning Amazon to compete more directly with platforms like YouTube and Hulu. This move diversifies Amazon’s advertising revenue and increases monetization of its entertainment content.

AWS’s Role in Overall Earnings

Amazon Web Services (AWS) remains the company’s most profitable division, generating high-margin revenue from cloud computing services such as on-demand computing power, storage, and databases. AWS serves businesses of all sizes, from startups to Fortune 500 companies, and benefits from economies of scale that allow it to maintain operating margins exceeding 25%.

In 2023, AWS generated over $90 billion in revenue and contributed more than half of Amazon’s total operating profit. This profitability helps offset the lower margins in retail, allowing the company to reinvest in logistics, fulfillment infrastructure, and content production without jeopardizing overall financial stability.

Non-AWS Profit Analysis

With AWS accounting for a large share of Amazon’s operating income, the question remains whether the company’s other divisions generate meaningful profits on their own. While first-party retail operates on thin or negative margins, the combination of third-party marketplace fees, subscription revenue, and advertising income has improved overall profitability.

Advertising stands out as one of Amazon’s most profitable non-AWS segments, with estimated operating margins exceeding 30%. The low cost of delivering digital ads compared to the revenue they generate makes this a highly lucrative business. Subscription services, particularly Prime, also contribute steady profits, as recurring fees provide predictable cash flow with relatively low incremental costs.

The third-party marketplace model further strengthens Amazon’s financial position. By collecting seller fees and offering fulfillment services rather than managing inventory directly, Amazon improves its retail margins. While first-party retail remains a low-margin business, the profitability of advertising, subscriptions, and third-party sales suggests that Amazon could sustain positive earnings without AWS, though at a much lower level.