Amazon’s Ad Business Is Quietly Becoming a $70 Billion Growth Engine

Amazon’s stock has been on a tear since the company reported first-quarter results last week, hitting fresh all-time highs. Most of the attention has naturally gone to Amazon Web Services, which posted 28% year-over-year growth on a $150 billion annualized run rate — its fastest pace in 15 quarters.

But cloud computing isn’t the only story here. In fact, one of the most underappreciated drivers of Amazon’s earnings growth has been quietly building momentum for years.

Amazon’s advertising business now generates more than $70 billion in trailing-12-month revenue, and it’s still growing in the low-20% range. For investors trying to figure out where the next wave of profit expansion will come from, this is the line item that deserves a closer look.

In Q1, advertising services revenue hit $17.2 billion — up 24% year over year, or 22% on a constant-currency basis. That marks the fourth straight quarter of 22% currency-neutral growth. To put that in context, the same segment was growing at 19% a year ago and 18% in Q4 2024.

What’s more striking is what this means for Amazon’s bottom line. While the company doesn’t break out ad segment profits, analysts widely regard it as a high-margin business — especially compared to retail. With e-commerce margins under constant pressure, advertising is likely providing a meaningful lift to overall profitability. AWS, of course, is also high-margin. Together, they give Amazon two powerful earnings engines running at strong double-digit growth rates.

It’s no surprise, then, that Amazon’s Q1 operating margin hit 13.1% — the highest in company history.

What’s fueling the momentum?

CEO Andy Jassy used much of the earnings call to walk through how Amazon is expanding both the reach of its ad platform and the tools available to advertisers.

On the reach front, Amazon deepened its partnership with Netflix through Amazon Audiences, which lets advertisers use Amazon’s shopping and streaming signals to target Netflix viewers. The company also expanded its local-advertising partnership with Comcast and rolled out interactive video ads.

On the tools side, Amazon expanded CreativeAgent — an AI-powered assistant that helps brands create ad content — to seven more countries. It also introduced sponsored product and brand prompts inside Rufus, its AI shopping assistant. Rufus itself is becoming a significant ad surface: monthly active users are up over 115%, and engagement surged nearly 400% year over year in Q1.

Jassy also pushed back on the idea that AI-driven shopping could hurt ad revenue. He argued that agentic shopping experiences involve “multi-turn conversations,” giving Amazon repeated opportunities to surface both organic and sponsored products.

“I believe that advertising will do well in a world of agentic commerce,” Jassy said during the call.

Not everyone is convinced

Still, some analysts and investors remain cautious. “Amazon’s ad business is a black box,” said Mark Chen, a portfolio manager at a mid-cap tech fund. “We don’t know the true margins, and it’s tied to retail spending, which could take a hit in a downturn. I’m not ready to price in a premium just yet.”

Lena Torres, a retail analyst at a New York-based research firm, sees it differently. “This is the most underrated part of Amazon’s story. They’re basically turning every search into a potential ad impression, and AI is only going to amplify that.”

But Dave Ralston, a former Amazon employee turned tech commentator, was more blunt: “Anyone who thinks AWS is the only growth story at Amazon hasn’t been paying attention. The ad business is a cash machine. It’s just not as flashy as AI or cloud, so people sleep on it. That’s their loss.”

Of course, risks remain. Amazon doesn’t disclose ad segment operating income, so the exact profit contribution is hard to pin down. And the business is tied to consumer spending and broader ad budgets, both of which can soften in a weaker economy.

Still, with the stock near all-time highs, the bull case for Amazon no longer rests solely on AWS. Advertising has quietly grown into a $70 billion-plus business compounding in the low-20% range, with what are likely software-like margins and a growing suite of AI tools that could sustain the pace.

In short, advertising may be the more underrated half of Amazon’s growth story — and it’s only getting started.