Amazon's advertising business posted $21.32 billion in Q4 revenue, up 23% year-over-year and slightly above Wall Street's $21.3 billion consensus. Subscription services added $13.12 billion, beating the $12.74 billion estimate with 14% growth.
The market didn't care. Amazon's stock dropped 10% after the February 5 earnings release, dragged down by a $21.2 billion hit from tax disputes, severance, and impairments. Adjusted operating income came in around $27.4 billion - solid, but overshadowed by CEO Andy Jassy's plan to spend $200 billion annually on infrastructure, primarily AWS expansion.
What's driving ad growth
The 23% ad growth reflects Amazon's stranglehold on purchase-intent traffic. When sellers want visibility at the moment shoppers are ready to buy, they pay Amazon. Sponsored product ads, display, and video inventory all contributed to the $21.32 billion quarter.
For context: that's higher quarterly ad revenue than Snap, Pinterest, and Reddit combined. Amazon's advertising business is now a $85+ billion annual run rate, making it the third-largest digital ad platform behind Google and Meta.
Subscription revenue - dominated by Prime memberships plus digital content - grew slower at 14%, but the $13.12 billion still beat expectations. Prime's value proposition hasn't changed much, but the installed base keeps expanding.
The AWS angle
Bank of America had forecast AWS growth acceleration to 22% year-over-year before earnings, above the Street's 21% estimate. AWS Q4 revenue came in around $34.88 billion on a foreign-exchange-neutral basis. That's the real story investors are watching - not ads, but whether Amazon can maintain cloud leadership while OpenAI, Microsoft, and Google pour money into AI infrastructure.
The $200 billion capex commitment is a bet on that race. Full-year 2025 net sales hit $716.9 billion, up 12%. Amazon's advertising and subscription wins got buried under the infrastructure spending debate, but the revenue momentum is there. Whether the margin profile survives the capex cycle is the open question.