Amazon Q3 FY2025 Earnings Call Transcript

Author: Erica Kollmann | October 30, 2025 06:42pm

Amazon.com, Inc. (NASDAQ:AMZN) released its third-quarter earnings report after Thursday’s closing bell.

• AMZN stock is moving after-hours. See the details here.

Below are the transcripts from the third-quarter earnings call.

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Operator

Thank you for standing by. Good day everyone and welcome to the Amazon.com third quarter 2025 financial results teleconference. At this time all participants are in a listen only mode. After the presentation, we will conduct a question and answer session. Today’s call is being recorded and for opening remarks I’ll be turning the call over to the Vice President of Investor Relations, Mr. Dave Fildes. Thank you sir: Please go ahead.

Vice President of Investor Relations

Hello and welcome to our Q3 2025 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO and Brian Olsofski, our CFO. As you listen to today’s conference call, we encourage you to have a press release in front of you which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2024. Our comments and responses to your questions reflect management’s views as of today, October 30, 2025 only and will include forward looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today’s press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non GAAP financial measures in our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website. You will find additional disclosures regarding these non GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we’ve seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions, tariff and trade policies, and customer demand spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce, cloud services and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don’t conclude any additional business acquisitions, restructurings or legal settlements. It’s not possible to accurately predict demand for our goods and services and therefore our actual results could differ materially from our guidance. And now I’ll turn the call over to Andy.

Andy Jassy (Chief Executive Officer)

Thanks Dave. We saw strong growth across our business in Q3 and we’re reporting $180.2 billion in revenue up 12% year over year excluding the impact from foreign exchange rates. Operating income was $17.4 billion but would have been over $21 billion if not for two special Q3 expenses, $2.5 billion for an FTC settlement and $$1.8 billion for estimated severance costs. Trailing 12 month free cash flow was $$14.8 billion. I’ll start with Amazon Web Services (AWS). Amazon Web Services (AWS) is growing at a pace we haven’t seen since 2022. Re accelerating to 20.2% year over year, our largest growth rate in 11 quarters. It’s worth remembering that year over year percentage growth is a relative term. It’s very different having 20% year over year growth on a $132 billion annualized run rate than to have a higher percentage growth rate on a meaningfully smaller annual revenue, which is the case with our competitors. Backlog grew to $200 billion by Q3 quarter end and doesn’t include several unannounced new deals in October, which together are more than our total deal volume for all of Q3. Amazon Web Services (AWS) is gaining momentum Customers want to be running their core and AI workloads in aws, given its stronger functionality, security and operational performance. And the scale I see in front of us gives me significant confidence in what lies ahead. I’ll share a little more detail on why. It starts with Amazon Web Services (AWS) having much broader infrastructure functionality so startups, enterprises and governments want to move their production workloads to the place that has the broadest and deepest array of capabilities. Amazon Web Services (AWS) has more services and deeper features within those services than anybody else and continues to innovate at a rapid clip. These are key building blocks for anything that customers want to create, and they’re a big part of why Gartner has named Amazon Web Services (AWS) leader in its Strategic Cloud Platform Services magic quadrant for 15 consecutive years. We’re bringing the same building block approach to AI. Amazon SageMaker makes it much simpler for companies to build and deploy their own foundation models. Amazon Bedrock gives customers leading selection of foundation models and superior price performance to deploy inference into their next generation applications. A lot of the future value companies will get from AI will be in the form of agents. Amazon Web Services (AWS) is heavily investing in this area and well positioned to be a leader. Companies will both create their own agents and use agents from other companies for those building their own. It’s been harder to build than it should be. It’s why we launched Strands to make it much easier to create agents from any foundation model that builders desire. For companies who successfully built agents, they’ve hesitated putting them into production because they lack secure scalable runtime services or memory or observability built specifically for agents. It’s why we launched Agent Core, a set of infrastructure building blocks that allow builders to deploy secure scalable agents. Ericsson used Agent Core to deliver AI agents across their workforce. Sony used it to build an agentic AI platform with enterprise level security, observability and scalability. And Cohere Health is using Agent Core to deploy agents that will reduce medical review times by up to 30 to 40%. Agent Core’s SDK has already been downloaded over a million times and our builders are excited about it. It’s an enabler. Companies will also use others agents and Amazon Web Services (AWS) continues to build many of the agents we believe builders will use in the future for coding. We’ve recently opened up our agentic coding IDE called Amazon Curo. More than 100,000 developers jumped into Amazon Curo in just the first few days of preview and that number has more than doubled since it’s processed trillions of tokens thus far. Weekly actives are growing fast and developers love its unique spec and tool call and capabilities for migration and transformation. We offer an agent called transform. Year to date, customers have already used it to save 700,000 hours of manual effort, the equivalent of 335 developer years of work. For example, Thomson Reuters used it to transform 1.5 million lines of code per month, moving from Windows to open source alternatives and completing tasks four times faster than with other migration tools. Customers have also already used Transform to analyze nearly a billion lines of mainframe code as they move mainframe applications to the cloud. For business customers, We’ve recently launched Amazon QuickSuite to bring a consumer AI like experience to work, making it easy to find insights, conduct deep research, automate tasks, visualize data and take actions. We’ve already seen users turn months long projects into days, get 80% plus time savings on complex tasks, and realize 90% plus cost savings. And for contact centers we offer Amazon Connect, which creates a more personalized and efficient experience for contact center agents, managers and their customers. Connect has recently crested a billion dollar annualized revenue run rate with 12 billion minutes of customer interactions being handled by AI in the last year and is being used by large enterprises like Capital One, Toyota, American Airlines and Ryanair. These are real, practical results for customers and there are many more examples like them. Because of its advantaged capabilities, security, operational performance and customer focus, Amazon Web Services (AWS) continues to earn most of the big enterprise and government transformations to the cloud. As a result, Amazon Web Services (AWS) is where the preponderance of Companies data and workloads reside and part of why most companies want to run AI in aws. To enable customers to do so, we need to have the requisite capacity and we’ve been focused on accelerating capacity the last several months, adding more than 3.8 gigawatts of power in the past 12 months, more than any other cloud provider. To put that into perspective, we’re now double the power capacity that aws was in 2022 and we’re on track to double again by 2027. In the last quarter of this year alone we expect to add at least another 1 gigawatt of power. This capacity consists of power, data center and chips, primarily our custom silicon Trainium and Nvidia. We’ve recently brought Project Rainier online, our massive AI compute cluster spanning multiple US data centers and containing nearly 500,000 of our Trainium 2 chips. Anthropic is using it now to build and deploy its industry leading AI model Claude, which we expect to be on more than 1 million Trainium 2 chips by year end. Trainium 2 continues to see strong adoption, is fully subscribed and is now a multibillion dollar business that grew 150% quarter over quarter. Today Trainium is being used by a small number of very large customers, but we expect to accommodate more customers starting with Trainium 3. We’re building Amazon Bedrock to be the biggest inference engine in the world and in the long run believe Amazon Bedrock could be as big a business for Amazon Web Services (AWS) as EC2 and the majority of token usage in Amazon. Amazon Bedrock is already running on Trainium. We’re also continuing to work closely with chip partners like Nvidia, with whom we continue to order very significant amounts, as well as with AMD and Intel. These are very important partners with whom we expect to keep growing our relationships over time. You’re going to see us continue to be very aggressive investing in capacity because we see the demand as fast as we’re adding capacity. Right now we’re monetizing it. It’s still quite early and represents an unusual opportunity for customers in aws. I’ll now turn to stores where the team continues to deliver and innovate for customers across our key priorities, selection, low prices and convenience, particularly fast Delivery. We’re offering 14% more selection since last quarter from popular brands like the North Face and Charlotte Tilbury, and we’ve added hundreds of thousands of items from popular brands this year. Everyday Essentials continues to grow quickly and year to date is growing nearly twice as fast as the rest of the business. We continue to make it easier for customers to order low price perishable groceries from Amazon and customers in more than 1000 cities and towns now can shop fresh groceries Alongside millions of Amazon.com products with free same day delivery. This is a game changer for customers who can now order milk alongside electronics, check out with one cart and have everything delivered to their doorstep within hours. The team also invented a new add to delivery button that lets customers add items to previously scheduled orders and has been used more than 80 million times since launch. And it just launched. It’s an example of one of those seemingly simple but powerful innovations that make customers lives easier. We remain committed to staying sharp on price and meeting or beating prices of other major retailers. In July we had our biggest Prime Day event ever. With customers saving billions of dollars across more than 35 categories, we continue to break records on speed. We’re on track to deliver at our fastest speeds ever for prime members globally once again this year and we’ve started rolling out three hour delivery in select US Cities. We’re also continuing to invest in infrastructure to speed up rural deliveries and serve more customers in more communities. That includes committing over $4 billion to expand our rural delivery network across the US. These are small towns where people want fast delivery, but where other companies have been backing out and reducing service. In contrast, we’ve already increased the number of rural communities with access to our same day and next day delivery by 60%, reaching roughly half of the total communities we plan to expand to by the end of the year. The Stores team is also innovating rapidly with AI. For example, Rufus AI AI, our AI powered shopping assistant, has had 250 million active customers this year, with monthly users up 140% year over year, interactions up 210% year over year, and customers using Rufus AI AI during a shopping trip being 60% more likely to complete a purchase. Rufus AI AI is on track to deliver over $10 billion in incremental annualized sales. Here are the highlights. Our generative AI powered audio feature that combines product summaries and reviews to make shopping easier has expanded from hundreds of products at launch to millions of products and millions of customers have used it, streaming almost 3 million minutes. An Amazon lens, an AI powered visual search tool that lets customers find products with their phone’s camera, a screenshot or a barcode now includes Lens Live, which instantly scans products and shows real time matches in a swipeable carousel. Tens of millions of customers are using. Amazon Lens each month. Moving on to Amazon ads, we’re pleased with the continued strong growth, generating $17.6 billion of revenue in the quarter and growing 22% year over year. We see strength across our broad portfolio of full funnel advertising offerings that helps advertisers reach an average ad supported audience of more than 300 million in the US alone. We also continue to be excited about our demand side platform Amazon dsp, which lets advertisers plan, activate and measure full funnel investments. Last quarter I mentioned our partnership with Roku and we’ve built on that with a partnership with Netflix providing advertisers using Amazon DSP with direct access to Netflix’s premium ad inventory. We announced integrations with Spotify and Sirius xm. With Spotify, we provide advertisers with direct programmatic access to a global audience of more than 400 million monthly ad supported listeners. And with Sirius XM, brands can reach 160 million monthly digital listeners across services like Pandora and SoundCloud. And we’re excited about the advertising opportunity around Prime Video Live Sports Live Sports got a lot of interest from advertisers in upfront negotiations for 2025 26, and we exceeded our own expectations for upfront commitments with significant growth across the board. Finally, we’re continuing to innovate for advertisers with AI. For example, in September we announced an agentic AI tool in Creative Studio that plans and executes the entire creative process in a matter of hours instead of weeks. We’re also inventing and seeing strong momentum in several other areas, and I’ll mention just a few in Prime Video Live Sports NBA on Prime tipped off last week, and our opening night double header averaged 1.25 million viewers in the U.S. a double digit increase over last season. On cable. You’ll see us bring the same constant innovation here that we brought to our NFL broadcast. We’re adding golf with the Masters in 2026, a new skins competition with the PGA Tour on Black Friday this year, and we’ve added Peacock and Fox One to Prime Video’s add on subscription offering of over 100 channels. In the US we continue to be energized by the response to Alexa compared to what we call the classic Alexa experience. Alexa customers are talking to Alexa two times more. Those interactions are much longer and they’re covering a broader range of topics. They’re using Alexa on fire TV at 2.5 times the rate of Classic, using natural conversation to discover audio content four times more, engaging with photos four times more. And customers are completing four times more shopping conversations that end in a purchase. We’ve expanded the number of Project Kuiper satellites in space to more than 150 and delivered over 1 gigabit per second speeds and tests with our enterprise grade customer terminal, the first commercial phased array we know of to clear that threshold. Finally, Zug’s Robo taxis are available to riders in Las Vegas and We’ve announced Washington D.C. as the eighth testing location. We’re excited for these to continue rolling out to more riders. Q4 is one of our busiest and most energizing times of the year and we’re excited about the continued demand for aws, the innovations we’ll announce the RE invent in December, the positive customer response to our AI powered experiences, all the gifts we’ll be delivering throughout the holiday season, and a lot more. Thanks in advance to our teammates around the world who are gearing up to deliver for customers once again. With that, I’ll turn it over to Brian for a financial update.

Brian Olsavsky (Chief Financial Officer)

Thanks Andy. Starting with our top line financial results, Worldwide revenue was $180.2 billion, a 12% increase year over year excluding a 90 basis point favorable impact of foreign exchange. In Q3, we reported worldwide operating income of $17.4 billion. This operating income includes two special charges which reduced operating income by $4.3 billion. The first charge of $2.5 billion is related to a legal settlement with the Federal Trade Commission which impacts the North America segment and is recorded in the other operating expense line. The second charge of $1.8 billion relates to severance costs for role eliminations and impacts all three of our segments. The severance charge is recorded primarily in the technology and infrastructure, sales and marketing and general and administrative expense line Items. Excluding these two charges, worldwide operating income would have been $21.7 billion or $1.2 billion above the high end of our guidance range. Moving to our segment results, we remain encouraged by the innovation our teams are delivering for customers across all three segments. In the North America segment, third quarter revenue was $106.3 billion, an increase of 11% year over year. International segment revenue was $40.9 billion, an increase of 10% year over year. Excluding the impact of 4 on exchange. Worldwide paid units grew 11% year over year. We continue to prioritize the inputs that matter most to our customers. In the third quarter. Our sharp pricing, broad selection and fast delivery speeds continue to resonate with customers. Customers appreciate the ability to quickly receive items essential for their daily needs, including perishable groceries, and have them delivered in the same day. Our millions of global third party sellers continue to be important contributors to our vast selection which helps customers find the items they need at competitive prices. We’re committed to building innovative services and features for our sellers, including our ongoing advancements in generative AI. Today, more than 1.3 million sellers have used our generative AI capabilities to more quickly launch high quality listings. Better listings translate into better traction with customers and in Q3 worldwide, third party seller unit mix was 62%, up 200 basis points from Q3 of last year. Shifting to profitability, North America’s segment operating income was $4.8 billion with an operating margin of 4.5%, excluding the $2.5 billion charge related to the legal settlement with the FTC. North America’s segment operating income would have been $7.3 billion with an operating margin of 6.9%. North America segment operating margin also includes a portion of the severance charge. International segment operating income was $1.2 billion with an operating margin of 2.9% excluding the impact of the severance charge. International segment operating margins expanded year over year. Globally, our progress on key inputs is delivering a better customer experience while driving a more efficient cost structure. For example, we’re making notable strides in improving inventory placement to speed up delivery to customers. As a result, for the third year in a row, we are on track to deliver our fastest speeds ever for prime members in 2025. We continue to tune and improve our fulfillment operations and our regionalized network is operating at scale. We see many benefits from our inbound process improvements, including a reduction of US inbound lead time by nearly four days compared to last year. This allows us to be more efficient with our inventory purchasing, which benefits working capital. We’re also placing inventory more strategically throughout the network and by leveraging our existing infrastructure, we’re now offering US customers the ability to order perishable groceries and receive them the same day in as little as five hours. We’re seeing positive early results since launching in January. When customers start shopping fresh groceries on Amazon, they are visiting the site more often and returning twice as often as non perishable shoppers. Looking ahead, we see further opportunity to improve productivity in our global fulfillment and transportation network. We will continue to improve inventory placement to drive down distance traveled and touches per package. We will also build on the gains from our regionalized network through algorithmic improvements as well as launching robotics and automation. While operating margin may fluctuate quarter to quarter, we have a deliberate approach to achieve sustained progress over the long term. Shifting to advertising advertising revenue was $17.7 billion and growth accelerated for the third quarter. Third consecutive quarter we continue to see strong growth on an increasingly large base as our full funnel advertising approach of connecting brands with customers is resonating. Moving next to our AWS Segment revenue was $33 billion, up 20.2% year over year. This is an acceleration of 270 basis points compared to last quarter, driven by strong growth across both our AI and core services and more capacity which has come online to support customer demand. Aws revenue increased $2.1 billion quarter over quarter and now has an annualized revenue run rate of $132 billion. AWS operating income is $11.4 billion and reflects our continued growth coupled with our focus on driving efficiencies across the business. We are expanding our data center footprint largely to accommodate Gen AI and to the extent those assets were placed into service, the related depreciation does impact our margins. As we’ve long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we’re making at any point in time. Now turning to our cash capex, which was $$34.2 billion in Q3, we’ve now spent $$89.9 billion so far this year. This primarily relates to AWS as we invest to support demand for AI and core services and in custom silicon like Trainium, as well as tech infrastructure to support our North America and international segments. We’ll continue to make significant investments, especially in AI as we believe it to be a massive opportunity with the potential for strong returns on invested capital over the long term. Additionally, we continue to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. These investments will support growth for many years to come. Looking ahead, we expect our full year cash capex to be approximately $$125 billion in 2025 and we expect that amount will increase in 2026. I’ll finish up my remarks with Net income. While we primarily focus our comments on operating income, our third quarter net income of $$21.2 billion includes a pre tax gain of $$9.5 billion related to our investment in Anthropic. This investment activity is not related to Amazon’s ongoing operations and is included in non operating income. We’re encouraged by the start of the peak season and we are ready to serve customers in the coming months. I want to thank our teams across Amazon for their hard work as we get ready to delight customers during the holiday season. Our commitment to elevating the customer experience is the only reliable way to drive sustainable value for our shareholders. With that, let’s move on to your questions.

OPERATOR

Thank you. At this time, we will now open the call up for questions. We ask each caller to please limit yourself to one question. If you would like to ask a question, please press Star one on your keypad. We ask that when you pose your question you pick up your handsets to provide optimum sound quality. Once again, to initiate a question, please press Star then one on your touchtone telephone. At this time. Please hold while we poll for questions. And our first question comes from the line of Justin Post with Bank of America. Please proceed.

Bank of America Equity Analyst

Great, thank you. I’ll ask on AWS. Can you just kind of go through how you’re feeling about your capacity levels and how capacity constrained you are right now? And then on your prepared remarks you mentioned trainium 3 demand and maybe broadening out your customer base. Can you talk about the demand you’re seeing, you know, outside of your major customers for Trainium? Thank you.

Andy Jassy (Chief Executive Officer)

Yeah, on the capacity side we’ve brought in quite a bit of capacity as I mentioned in my opening comments. 3.8 gigawatts (GW) of capacity in the last year with another gigawatt plus coming in the fourth quarter and we expect to double our overall capacity by the end of 2027. So we’re bringing in quite a bit of capacity today overall in the industry. Maybe the bottleneck is power. I think at some point it may move to chips, but we’re bringing in quite a bit of capacity and as fast as we’re bringing it in right now we are monetizing it and then on the Trainium demand outside of our major customers. So first of all, as I mentioned on Trainium 2 it’s really doing well. It’s fully subscribed. On Trainium 2 we have, you know, it’s a multi billion dollar business at this point. It grew 150% quarter over quarter in revenue. And you see really big projects at scale now like our project Rainier that we’re doing with Anthropic, where they’re running their next version of their training, the next version of Claude on top of Trainium 2 on 500,000 Trainium 2 chips going to a million Trainium 2 chips by the end of the year. As I mentioned, we have Today with Trainium 2 we have a small number of very large customers on it. But because train Trainium is 30 to 40% more price performant than other options out there and because as customers as they start to contemplate broader scale of their production workloads moving to being AI focused and using inference. They badly care about price performance. And so we have a lot of demand for Trainium. Trainium 3 should preview at the end of this year with much fuller volumes coming in the beginning of 26. We have a lot of customers, both very large and I’ll call it medium size, who are quite interested in training 3.

OPERATOR

And the next question comes from the line of Brian Nowak with Morgan Stanley.

Morgan Stanley Equity Analyst

Thanks for taking my questions. Congrats on the quarter guys. So maybe maybe two. One Andy, sort of a philosophical chip question. There’s a lot of questions in the. Market about Trainium and sort of its positioning versus other third party chips. So how do you think about the key hurdles with Trainium 3 you need to overcome to really make Trainium adoption broader to your point on the last question and continue to drive Trainium as opposed to satisfying what could be broader demand with third party chips in the near term?

Andy Jassy (Chief Executive Officer)

Yeah. Well, first of all, we’re always going to have multiple chip options for our customers. It’s been true in every major technology building block or component that we’ve had in aws. Really in the history of aws, it’s never just one player that over a long period of time has the entire market segment and could satisfy everybody’s needs on every dimension. And so we have a very deep relationship with NVIDIA. We have for a very long time and we will for as long as I can foresee the future. We buy a lot of NVIDIA. We are not constrained in any way in buying NVIDIA and I expect that we’ll continue to buy more NVIDIA both next year and in the future. But we’re different from most technology companies in that we have our own very strong chip team and this is our Annapurna team. And you saw it first on the CPU side with what we built with Graviton, which is about 40% better price performance than than the other x86 processors. And you’re seeing it again on the custom silicon on the AI side with Trainium, which is about the same amount of price performance benefit for customers relative to other GPU options. And you know, our, our customers to be able to use AI as expansively as they want. And remember it’s still relatively early days at this point, they, they’re going to need better price performance and they care about it deeply. And so I mentioned earlier the momentum that Trainium 2 has and I think that for us as we think about Trainium 3, I expect Trainium 3 will be about 40% better than Trainium 2. And Trainium 2 is already very advantaged on price performance. So we have to of course, deliver the chip. We have to deliver it in volumes and deliver it quickly. And we have to continue to work on the software ecosystem, which gets better all the time. And as we have more proof points like we have with Product Rainier, with what Anthropic is doing on Trainium 2, it builds increasing credibility for Trainium. And I think customers are very bullish about it. I’m bullish about it as well.

OPERATOR

And our next question comes from the line of Doug Anmuth with JPMorgan. Please proceed with your question.

JPMorgan Equity Analyst

Thanks for taking the question. I’ll stick with basically the same topic. Andy, but can you just talk a. Little bit about the architecture of Project. Rainier and how differentiated and you know, what that means for customers and for AWS and do you expect Renew to expand beyond Anthropic? And how do you replicate Rainier with Trainium 3 chips? Thank you.

Andy Jassy (Chief Executive Officer)

Yeah, I think what is compelling for Anthropic, around Project Rainier is, you know, really is the Trainium 2 chips, which, you know, we’ve built a very. First of all, we built a very. Large cluster that they can use in a very expansive way. And it’s not simple to be able to build a cluster that has 500,000 plus chips going to a million. That’s, that’s an infrastructure feat that’s hard to do at scale. And so, you know, some piece of it is the infrastructure capabilities that we’ve built over a long period of time in AWS that is, you know, unusual in the industry, but it’s just also the performance, performance of the chip and, and the price performance, which both of which matter. And you know, I think that, you know, Project Rainier is something that is specific for Anthropic, but we have a lot of other customers who are interested in employing large clusters of Trainium chips that we’re going to hopefully give them a chance to do so with Trainium 3.

OPERATOR

And the next question comes from the line of Mark Mahaney with Evercore ISI. Please proceed with your question.

Evercore ISI Equity Analyst

Thanks. I want to ask about two topics. Groceries and then how to think about Headcount in the future. And on groceries, I want to. The perishables, I think last quarter you talked about 70% or something of users had never purchased from Perishables from Amazon before. Just talk about whether you, you know, I think you used the term game changer before. Does this mean that maybe we don’t know you no longer need to do Amazon Fresh stores. You always had this DVD delivery van density advantage. And have you kind of reached a point you think of scale and speed, that you really can change people habit and really have them consider Amazon as one of their first grocery options? Do you really feel like you’re at that point? And then secondly, just on the headcount, given some of the recent news, just talk to us about how you think about headcount going forward. Are you seeing is the level of efficiencies that you’re getting from from AI such that you can keep headcount relatively. Flattish for the foreseeable future. Just talk about the pros and cons or the wins and losses in terms of that headcount going forward.

Andy Jassy (Chief Executive Officer)

Thank you. Yeah, so I’ll start with grocery. Mark, you know we have a very large grocery business. You know, if you look at our entire grocery business, if I don’t even count Whole Foods Market and fresh in the last 12 months to over $$100 billion of gross merchandising sales, which would make us a top three grocery in the US A good chunk of it is a lot of the items that you’d find in the middle aisles. So consumables and canned goods and pet food and health and beauty, very significant. That continues to grow at a very good clip. But then we also have Whole Foods Market, which is the pioneer in organic foods, which is also growing at a faster clip than most grocery companies and with an attractive trajectory on profitability. And we’ll expand our Whole Foods physical presence over the coming years here. And I’m also very excited about this new concept daily Shop that we have, which is a smaller version of Whole Foods in urban settings, which we have three that we’ve launched that are off to very good starts that you should expect to see more of as well. And we have always been, you know, as you reference, we’ve talk a lot about having a larger mass physical presence and we continue to experiment with various formats. But the one that we are most excited about is what you reference, which is the ability to provide perishable groceries with same day deliveries. And if you think about how many of our customers are buying from us multiple times a week and who are buying things like shampoo or detergent or paper cups or water, where the ability to add milk and eggs and yogurt and other perishables to their order and have it, have it live in the same shopping cart, then show up a few hours later is very compelling. And we started with a few markets about a year ago. And we were really taken aback at the adoption. Not just the number of people that started buying perishables from us very quickly, but but how often they came back downstream to buy perishables and groceries from us in the future. And so we’ve now expanded that to 1,000 cities around the US. We’ll be in 2,300 by the end of the year. And it’s really changing the trajectory and the size of our grocery business. And I also believe that this many years tradition of the weekly stock up, grocery stock up is changing and I think we’re a big part of that and I think there’s a lot of potential there for the grocery side. It doesn’t mean that we won’t continue to experiment with other physical formats, but we’re onto something very significant with what we’re doing with perishables from our same day facilities. And then on your headcount question, you know, what I would tell you is the announcement that we made a few days ago was not really financially driven and it’s not even really AI driven, not right now at least. It really, it’s culture. And if you grow as fast as we did for several years, you know, the size of businesses, the number of people, the number of locations, the types of businesses you’re in, you end up with a lot more people than what you had before and you end up with a lot more layers. And when that happens, you know, sometimes without realizing it, you can weaken the ownership of the people that you have who are doing the actual work and who own most of the two way door decisions, the ones that should be made quickly and right at the front line. And it can lead to slowing you down. And as a leadership team, we are committed to operating like the world’s largest startup. And that means removing layers. It means increasing the amount of ownership that people have and it means inventing and moving quickly. And I don’t know if there’s ever been a time in the history of Amazon or maybe business in general with the technology transformation happening right now, where it’s important to be lean, it’s important to be flat, and it’s important to move fast. And that’s what we’re going to do.

OPERATOR

And the next question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.

Goldman Sachs Equity Analyst

Thanks so much for taking the question. Wanted to know, Andy, if you could reflect on the opportunity that’s continuing to present itself in terms of rolling out more robotics and automation and the broader theme of physical AI? Across your operations. And I should be thinking about that as a driver of potential efficiencies, but also as a driver of the ability to possibly reinvest back in the business over the long term. Thanks so much.

Andy Jassy (Chief Executive Officer)

Robotics is a very substantial area of investment for us. We have over a million robots in our fulfillment network at this point. And I would say that while that’s significant, we have a lot of invention in flight. So I expect that we’ll have more over a period of time. You know, robotics are very important for us and for our customers and for our teammates because they improve safety, they boost productivity, they increase speed, and they let our human teammates focus on problem solving and what they do best. And we expect that our people remain at the heart and the center of our fulfillment network as they have from when we first started working on robotics. And we expect that over time we will have a fulfillment network where robots and humans complement each other and work together. But I think you’re going to continue to see us invent, invest very significantly in robotics. It’s going to help on the safety, the productivity, the speed, and ultimately some of the cost pieces, which will allow us to continue to improve the customer experience.

OPERATOR

And the next question comes from the line of John Blackledge with TD Cowen. Please proceed with your question.

TD Cowen Equity Analyst

Great, thank you. How does Amazon think about agent e-commerce going forward? And how do you think Amazon will serve customers using agents to purchase goods. On Amazon in the future? Thank you.

Andy Jassy (Chief Executive Officer)

I’m very excited about, and as a business, we’re very excited about, in the long term, the prospect of agentic commerce. And it has a chance to be good for customers. It has a chance to be really. Good for e-commerce. And, you know, I think if you’re, if you know what you want to buy, there are few experiences that are better than coming to Amazon. But if you don’t know what you want, it’s, you know, a physical store with a physical salesperson still has some advantages. Obviously, lots of people do it on Amazon all the time, but you very often want to ask questions and help, you know, get help narrowing what you’re. Going to look for. And as you keep asking new questions, having a whole bunch of different options presented to you. And I think AI and agentic commerce are going to change the experience online, where that experience, where you’re narrowing what you want when you don’t know, is going to get better online than it even is in physical environments. Now, we obviously have our own efforts here in agentic commerce. We have Rufus, which I talked about in my opening comments, which is continuing to get better and better and used more broadly. And we have features like Buy for Me where we will surface on Amazon, even items that we don’t stock that other merchants have. And then if customers want us to go and buy it for them on those merchants websites, we will do that. And both of those have been successful for us. But we’re also, you know, having conversations with and expect over time to partner with third party agents. And you know, I think that it reminds me in some ways of the beginning of search engines many years ago being sources of discovery for commerce. And you know, you had to kind of figure out the right way to work together. And today search engines are a very small part of our referral traffic and third party agents are a very small subset of that. But I do think that we will find ways to partner. We have to find a way though, that makes the customer experience good. You know, right now I would say the customer experience is not good. There’s no personalization, there’s no shopping history. The delivery estimates are frequently wrong, the prices are often wrong. So we’ve got to find a way to make the customer experience better and have the right exchange of value. But I do think that the exciting part of this and the promise is that AI and agentic commerce solutions are going to expand the amount of shopping that happens online. And I think that’s really good for customers and I think it’s really good for Amazon because at the end of the day you’re going to buy from the outfit that allows you to have the broadest selection, great value and continues to deliver for you very quickly and reliably. And I think that bodes well for us.

OPERATOR

And our final question comes from the line of Colin Sebastian with Baird. Please proceed with your question.

Baird Equity Analyst

Thanks. Good afternoon. I guess first on AWS, following up there, how much of this acceleration is driven by core infrastructure versus AI workload monetization? And I think part of it is trying to understand how important newer services like Agent Corp are becoming in bringing enterprises to AWS to build agents. And then I guess secondly regarding the acceleration in advertising, if you could potentially disaggregate the core advertising contribution versus DSP and Prime Video, that would be helpful as well.

Andy Jassy (Chief Executive Officer)

Thank you. I’ll start on the AWS side. You know, we are seeing, you know, we’re really pleased with the results from this quarter. 20% year over year on a annualized run rate of $132 billion is unusual and we have momentum and you can see it and we see the growth in both our AI area where we see it in inference, we see it in training, we see it in the use of our trainium custom silicon Bedrock continues to grow really quickly. Amazon SageMaker continues to grow quickly. And I think that the number of companies who are working on building agents is very significant. I do believe that a lot of the value that companies will realize over time in AI will come from agents. And I think that building agents today is still harder than it should be. You need tools to make it easier, which is why we built Strands, which is an open source capability that lets people build agents from any model that they can imagine. But even more so when you talk to enterprises or companies that care a lot about security and scale, they’re starting to build agents and they don’t really feel like they’ve got, they’ve had building blocks that allow them to have the type of secure, scalable agents that they need to bet their businesses and their customer experiences and their data on. And that’s why that was really the inspiration behind Agent Corp was to build another set of primitive building blocks like we built in the early days of AWS where it was compute and storage and database. We defined a set of building blocks that you needed to be able to deploy agents securely and scalably that we provide in Agent Core. And when we talk to our customers, it really resonates. There is not anything else like it. It’s changing their time frame and their receptivity to building agents. And it’s very compelling for them. So I do think, you know, the combination of what we’re doing to enable agents to be built and run securely and scalably, as well as some of the agents that we’re building ourselves, that our customers are excited about, are compelling for them. And you know, I think the other place we see a lot of growth in AWS also, you know, is just the number of enterprises who are going, who have gotten back to moving from on premises infrastructure to the cloud. And we continue to earn the lion’s share of those transformations. And you know, I look at the momentum we have right now and I believe that we can continue to grow at a clip like this for a while. You know, I think on the advertising side, you know, that is also an area where I think collectively we feel very pleased about the progress every single one of our advertising offerings this quarter grew in a meaningful way. I think there’s a few things going on for us. We have what I think of as a pretty unusual full funnel offering. And if you look at the top of the funnel, which typically tends to be awareness building and broad scale to be able to use our own prime video and our live sports capabilities as. Well as going all the way down. To the bottom of the funnel at point of sale, being able to use sponsored products, that’s, you know, most people don’t have a full funnel offering as robust as that. And then when you layer on top of it, the combination of the audience curation and development we can do along with the advantage measurement, it just all leads to a return on advertising spend. It’s very unusual and I think there are multiple places where we can expect to continue to grow. You know, one is in our stores business. I still think if you look at the worldwide market segment share of retail, still 80 to 85% of it lives in physical stores. And that equation is going to flip over time and I think AI is going to only accelerate that. So I think we have an opportunity, a significant opportunity still in our existing stores and then I think video. We’ve only been at this for a little bit of time, but it’s already a very large amount of advertising revenue and, and we’re still relatively early stage. I think that will continue to be a big area of growth. And then as you reference the amount their demand side platform or Amazon DSP (Demand Side Platform) that is growing really quickly as well. And some of it had to do with the fact that we had some features. We always had a number of the core components people wanted around some of our properties, the measurement capabilities, Amazon marketing, cloud. But we lacked some features for a while as we were building out our DSP (Demand Side Platform) that customers told us mattered. And the team over the last 20 months have closed those gaps in a very significant way so that now people feel like our DSP (Demand Side Platform) is fully featured. And then you look at some of the partnerships that we’ve done. You know, the Roku partnership gives us the largest connected TV footprint in the us and you layer on top of that what we’ve recently done in providing our DSP (Demand Side Platform) customers the opportunity to integrate with the ad inventory in Netflix and in Spotify and Sirius xm. You know, it’s powerful and so we are growing very quickly on the demand side platform. So very optimistic about what we’re doing there. We’ve continued work to do obviously, but I don’t think we’re close to being able to grow that. Thanks for joining us on the call today and for your questions.

OPERATOR

A replay will be available on our investor relations website for at least three months. We appreciate your interest in Amazon and look forward to speaking with you again next quarter.

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