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How Amazon Makes Money

Product sales, advertising, subscription services, and cloud services

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

Key Takeaways

  • Amazon makes money through its retail, subscriptions, and web services, among other channels.
  • Retail remains Amazon’s primary source of revenue, with online and physical stores together accounting for the biggest share.
  • Amazon Web Services (AWS) currently generates all of Amazon’s operating profits and is growing at a robust pace.
  • Amazon is currently facing a union vote at its warehouse in Bessemer, Ala., and may face another one starting on March 25, 2022, from employees at a facility in Staten Island, N.Y.

Amazon’s Financials

Amazon ranks as one of the world’s top companies by market value. As of Feb. 18, 2022, Amazon had a market capitalization of $1.6 trillion.

The company posted net income of $14.3 billion during the fourth quarter (Q4) of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. Net income rose 98.3% compared with the year-ago quarter. Revenue, which Amazon calls net sales, rose 9.4% year over year (YOY) to $137.4 billion for the quarter. Amazon’s profits were boosted by a significant increase in other income. Operating income, which the company uses as a profitability metric for its business segments, fell 49.7% YOY to $3.5 billion.

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 and export sales for those areas.

Retail can be broken down further into online stores, comprising the bulk of sales, and physical stores. Company-wide, online stores accounted for $66.1 billion in sales in Q4 FY 2021, or about 48% of net sales, while physical stores generated $4.7 billion in sales, or about 3% of net sales.

North America

Amazon’s North America segment dominates its net sales, accounting for $82.4 billion in Q4 FY 2021. That is an increase of 9.3% from the year-ago quarter and comprises about 60% of the company’s net sales for the quarter. The segment posted an operating loss of $206 million during the quarter, a significant deterioration from operating income of $2.9 billion in the year-ago quarter.

Aside from retail, the other primary source of revenue for North America is subscriptions, including Amazon Prime, which offers unlimited free shipping and unlimited streaming of movies, TV shows, and more.

International

Amazon’s International segment consists of Amazon’s retail business for consumer products and subscriptions for internationally focused online stores. It also includes export sales from those stores, but not those from North America-focused online stores.

The segment reported an operating loss of $1.6 billion in Q4 FY 2021, a significant deterioration from operating income of $363 million posted in the year-ago quarter. Net sales for the International segment fell nearly 1.0% YOY to $37.3 billion, comprising about 27% of total net sales.

Amazon Web Services (AWS)

Amazon Web Services (AWS), launched in 2006, provides services to businesses, government agencies, and academic institutions to store information and deliver content. Amazon says 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’s AWS segment generated net sales of $17.8 billion and operating income of $5.3 billion in Q4 FY 2021. Net sales grew 39.5% and operating income rose 48.5% compared with the year-ago quarter. Although net sales from AWS are below net sales for the North America segment and International segments, AWS’s operating income is substantially higher. The AWS segment accounts for about 13% of total net sales. Because the other two segments posted operating losses in the fourth quarter, AWS accounts for all of the company’s operating income.

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 Recent Developments

On Feb. 16, 2022, Amazon workers at a warehouse in Staten Island, N.Y., agreed with the company to hold a union vote in March. The union election will be held at the warehouse beginning on March 25 and ending on March 30. The election’s parameters still must be approved by the National Labor Relations Board (NLRB) before the election is allowed to proceed.

The election vote in Staten Island is set to begin just as a separate election at an Amazon warehouse in Alabama finishes. Workers at the facility in Bessemer began voting by mail in early February and have until March 25 to send their ballots to the NLRB.

On Dec. 21, 2021, Amazon announced plans to create new jobs at its Phoenix Tech Hub in Arizona and its Austin Tech Hub in Texas over the next few years. The company said that it will create a total of 550 corporate and tech jobs in Phoenix and more than 2,000 in Austin.

How Amazon Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Amazon and its commitment to diversity, inclusiveness, and social responsibility. We examined the data that Amazon releases to show you how it reports the diversity of its board and workforce, to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Amazon discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Amazon breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.

Amazon Diversity & Inclusiveness Reporting
  Race Gender Ability Veteran Status Sexual Orientation
Board of Directors          
C-Suite          
General Management ✔ (U.S. Only)      
Employees ✔ (U.S. Only)      
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. U.S. Securities and Exchange Commission. “Amazon.com Inc.: Form 10-K for the Fiscal Year Ended December 31, 2020,” Page 3.

  2. Investopedia. “Amazon.com Inc. (AMZN).”

  3. U.S. Securities and Exchange Commission. “Amazon.com Inc.: Form 8-K Dated Feb. 3, 2022,” Page 15.

  4. U.S. Securities and Exchange Commission. “Amazon.com Inc.: Form 10-K for the Fiscal Year Ended December 31, 2021,” Page 64.

  5. U.S. Securities and Exchange Commission. “Amazon.com Inc.: Form 8-K Dated Feb. 3, 2022,” Pages 15 and 21.

  6. U.S. Securities and Exchange Commission. “Amazon.com Inc.: Form 8-K Dated Feb. 3, 2022,” Page 17.

  7. U.S. Securities and Exchange Commission. “Amazon.com Inc.: Form 10-K for the Fiscal Year Ended December 31, 2021,” Pages 3 and 64.

  8. Amazon Web Services. “About AWS.”

  9. Statista. “Amazon Leads $180-Billion Cloud Market.”

  10. The Wall Street Journal. “Amazon and Union Organizers in New York Agree on March Date for Election.”

  11. Amazon.com Press Center. “Amazon Announces Plans to Create 550 New Jobs at Phoenix Tech Hub.”

  12. Amazon.com Press Center. “Amazon Announces Plans to Create 2,000 New Jobs at Austin Tech Hub.”

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