Amazon Ads Grows 12% in Q3 as AI Spending Drags Net Income Down

Amazon's net income fell to $20.7 billion in the third quarter of 2025, down from $21.2 billion a year earlier, and its stock dropped 7% in after-hours trading on Thursday after investors weighed the cost of the company's AI buildout.

CEO Andy Jassy framed the quarter differently. "Our operating margins have long been strong on our core offering," he told investors during Amazon's Q3 earnings call on Thursday, adding that they're "rapidly improving on the AI side, too."

Why did net income fall?

The numbers carry a distortion from last year. Amazon's Q3 2024 results included $9.5 billion in pre-tax gains from its investment in AI startup Anthropic, according to Amazon's earnings report. Without a comparable windfall this year, the year-over-year comparison turns negative.

Investors were not persuaded. The stock slid 7% after hours on Thursday. They expect payouts from AI investments to keep rising, and the cash flow statement shows the opposite: Amazon reported negative $42.4 billion in cash flow over the past 12 months, compared with positive $14.8 billion a year earlier. The company has not slowed its AI spending.

Where is AI driving growth?

AI remains the engine behind nearly all of Amazon's revenue increases this year. AWS, which provides AI and cloud computing infrastructure (the remote servers and tools businesses rent to run software), grew 39.3% year over year. That was its fastest growth rate in nearly five years.

Jassy projected a large ceiling for the segment. AWS could grow into "a trillion-dollar revenue business in the next five to 10 years," he said, driven by businesses moving their core workloads onto the platform.

What happened to Amazon Ads?

Amazon Ads revenue reached $19.6 billion, up 12% year over year. That is double-digit growth, but it lagged the rest of the year: the unit reported 22% growth in Q1 and 26% in Q2.

Jassy attributed the slowdown to scheduling. Amazon moved Prime Day from Q3 into Q2 this year, which pulled ad revenue forward. Q3 also lacked NBA games on Amazon Prime Video, which would have lifted advertising demand.

The ads business is itself increasingly built on AI. In September, Amazon launched Amazon Ads Agent, a platform that merges the Amazon Ads console and Amazon DSP (the demand-side platform advertisers use to buy ads programmatically). The tool lets advertisers launch full-funnel campaigns and continually optimizes them once live.

Is agentic shopping hurting Amazon yet?

Agentic AI — software agents that act on a user's behalf — is popular with advertisers, but consumers have not adopted it at scale. Jassy addressed the question directly on the call.

"The natural question is whether agentic shopping from external horizontal agents is meaningfully impacting Amazon ads," Jassy said, "and the answer is no."

Agentic shopping is "still not great," he added, and is not meaningfully more convenient than humans completing one-click orders themselves.

The caveat sat in a single word. "Few customers are doing much shopping this way yet," Jassy said. That "yet" signals where Amazon expects the behavior — and the pressure on its ad business — to move next.