Amazon.com, Inc. Q3 2025 Financial Performance Summary
1. Overall Financial Performance
- Revenue Growth: Net sales reached 180.2 billion USD in the third quarter of 2025, a 13% increase compared to 158.9 billion USD in the same period last year. Excluding foreign exchange fluctuations, the growth rate was 12%.
- Net Income Surge: Net income for the third quarter rose significantly to 21.2 billion USD (diluted earnings per share of 1.95 USD), up from 15.3 billion USD in the prior year.
- Key Insight: This growth was primarily driven by a spike in non-operating income, which reached 10.7 billion USD for the quarter, largely due to valuation gains from the investment in Anthropic.
- Operating Income: Despite the revenue growth, operating income remained flat year-over-year at 17.4 billion USD after accounting for significant one-time charges.
2. Major One-time Charges and Accounting Changes
Profitability this quarter was impacted by several substantial expenses:
- FTC Settlement: Amazon recognized a 2.5 billion USD charge to settle litigation with the U.S. Federal Trade Commission (FTC), categorized under “Other operating expense.”
- Severance Costs: The company recorded approximately 1.8 billion USD in estimated severance costs related to planned position eliminations across all segments.
- Equipment Useful Life Adjustment: Effective January 1, 2025, Amazon shortened the estimated useful life of certain servers and network equipment from 6 years to 5 years to account for rapid iterations in AI technology. This change increased depreciation expenses by 392 million USD in Q3 and decreased net income by 298 million USD, primarily impacting AWS profit margins.
3. Segment Analysis
- AWS (Cloud Services): Remained the strongest performer, with sales growing 20% to 330 billion USD and operating income increasing to 11.4 billion USD. Despite increased infrastructure spending and severance costs, AWS continues to be the company’s primary profit engine.
- North America: Sales grew 11% to 106.3 billion USD, but operating income fell to 4.8 billion USD from 5.7 billion USD a year ago. This decline was due to the FTC settlement, severance costs, and increased logistics and technology expenses.
- International: Sales rose 14% to 40.9 billion USD, with an operating income of 1.2 billion USD, a slight decrease from the previous year driven by severance and transportation costs.
4. Investment and Capital Expenditures (CAPEX)
Amazon is aggressively expanding investment in technical infrastructure to support AWS and AI initiatives:
- CAPEX Surge: Cash capital expenditures for the trailing twelve months (TTM) reached 89.9 billion USD, far exceeding the 51.6 billion USD from the previous year. In Q3 alone, cash spent on property and equipment reached 35.1 billion USD.
- Free Cash Flow Pressure: While operating cash flow remained strong (130.7 billion USD TTM), the massive capital expenditures caused TTM free cash flow to shrink to 14.8 billion USD, compared to 47.7 billion USD in the prior year.
- Anthropic Investment: Amazon continued its investment in the AI firm Anthropic. This quarter, the company recorded significant unrealized gains (7.2 billion USD valuation increase) due to the conversion of convertible notes into preferred stock and subsequent valuation adjustments.
5. Legal and Regulatory Risks
- Antitrust Investigations: In addition to the FTC settlement, an Italian administrative court upheld an antitrust ruling in September 2025, though it reduced the fine from 1.13 billion EUR to 752 million EUR.
- Tax Disputes: The company faces tax audits in multiple countries, including a challenge from the Luxembourg tax authorities regarding 2021 intangible asset allocations and claims from Indian tax authorities regarding cloud service fees.
6. Liquidity and Credit Agreements
- New Credit Facility: On October 29, 2025, Amazon signed a new 5 billion USD unsecured 364-day revolving credit agreement to replace a maturing facility. This agreement has no financial covenants and is intended for general corporate purposes and supporting commercial paper issuance.
Based on the Form 10-Q for the third quarter ended September 30, 2025, the litigation with the Federal Trade Commission (FTC) has had a significant direct impact on Amazon’s financial condition and operations. Below is a detailed analysis of the background, specific financial impacts, and potential business risks associated with this litigation:
1. Litigation Background and Allegations
The legal challenges from the FTC and other regulatory bodies are not isolated incidents but stem from long-term scrutiny of Amazon’s market dominance:
- Origin of Allegations: Since March 2020, the FTC, various state attorneys general, and private plaintiffs have filed a series of cases in the U.S., Canada, and the U.K. These lawsuits allege that Amazon has violated federal and state antitrust and consumer protection laws.
- Core Allegations: The complaints cover a wide range of business practices, primarily including:
- Price Manipulation: Allegations of price-fixing arrangements between Amazon and its suppliers and third-party sellers.
- Abuse of Market Power: Allegations that Amazon holds a monopoly in online superstore, marketplace, or intermediary service markets and has attempted to maintain that monopoly.
- Specific Anti-competitive Behavior: Issues regarding Amazon’s pricing policies, the selection mechanism for Featured Offers (the “Buy Box”), the use of seller data, advertising practices, the structure of Amazon Prime, and the promotion of its private-label products on its website.
2. Direct Financial Impact on Q3 2025
The FTC litigation caused a substantial and specific hit to Amazon’s financial statements in the third quarter of 2025:
- Massive Settlement Charge: Amazon recorded a 2.5 billion USD expense during this quarter to resolve the FTC litigation. This charge was classified under “Other operating expense (income), net.”
- Erosion of Profits: Because this 2.5 billion USD charge primarily affected the North America segment, it significantly weighed down the segment’s operating income. Despite growth in net sales for North America, its operating income decreased compared to the previous year due to this settlement and other severance costs.
- Cash Flow Outflow: The company expects to use cash on hand to pay the settlement amount for the FTC litigation.
3. Long-term Risks and Potential Business Model Impact
Beyond the one-time penalty, these legal proceedings pose ongoing risks to Amazon’s long-term operating model:
- Sought Remedies: Plaintiffs (including the FTC) are seeking not only billions of dollars in damages but also injunctive relief and structural relief, which could potentially imply a divestiture or breakup of business units.
- Forced Changes to Business Conduct: The outcome of legal proceedings could force Amazon to alter its business practices. For instance, regulators might restrict how Amazon operates its Prime service, manages third-party seller data, or displays products. If forced to change these core business models, the company’s operations could face significant adverse effects.
- Persistent Regulatory Pressure: Amazon acknowledged in the filing that its business faces increasing regulatory scrutiny and that the outcomes of legal proceedings are highly uncertain. If final judgments require Amazon to pay amounts exceeding its recorded reserves or impose non-monetary remedies (such as business separation or operational changes), it could materially impact the business.
Based on the Form 10-Q for the third quarter ended September 30, 2025, here is the translated and formatted Consolidated Statement of Operations and Revenue Breakdown.
Amazon.com, Inc. Q3 2025 Income Statement and Revenue Detail
(All amounts in millions USD)
| Items | 2025 Q3 Amount | % of Total Revenue | 2024 Q3 Amount | YoY Growth % |
| Total Net Sales | $180,169 | 100.0% | $158,877 | +13.4% |
| Revenue Breakdown | ||||
| Online stores | $67,407 | 37.4% | $61,411 | +9.8% |
| Physical stores | $5,578 | 3.1% | $5,228 | +6.7% |
| Third-party seller services | $42,486 | 23.6% | $37,864 | +12.2% |
| Advertising services | $17,703 | 9.8% | $14,331 | +23.5% |
| Subscription services | $12,574 | 7.0% | $11,278 | +11.5% |
| AWS (Cloud services) | $33,006 | 18.3% | $27,452 | +20.2% |
| Other | $1,415 | 0.8% | $1,313 | +7.8% |
| Operating Expenses | ||||
| Cost of sales | $88,670 | 49.2% | $80,977 | +9.5% |
| Fulfillment | $27,679 | 15.4% | $24,660 | +12.2% |
| Technology and infrastructure | $28,962 | 16.1% | $22,245 | +30.2% |
| Sales and marketing | $11,686 | 6.5% | $10,609 | +10.2% |
| General and administrative | $2,875 | 1.6% | $2,713 | +6.0% |
| Other operating expense (income), net | $2,875 | 1.6% | $262 | +997.3% |
| Total Operating Expenses | $162,747 | 90.3% | $141,466 | +15.0% |
| Operating Income | $17,422 | 9.7% | $17,411 | +0.1% |
| Non-Operating Items | ||||
| Interest income | $1,100 | 0.6% | $1,256 | -12.4% |
| Interest expense | $(538) | -0.3% | $(603) | -10.8% |
| Other income (expense), net | $10,186 | 5.7% | $(27) | N/A |
| Income before income taxes | $28,170 | 15.6% | $18,037 | +56.2% |
| Provision for income taxes | $(6,910) | -3.8% | $(2,706) | +155.4% |
| Equity-method investment activity | $(73) | 0.0% | $(3) | N/A |
| Net Income | $21,187 | 11.8% | $15,328 | +38.2% |
| Diluted EPS | $1.95 | $1.43 | +36.4% |
Key Data Analysis and Insights:
- Revenue Growth Drivers:
- AWS remains a powerhouse with 20.2% YoY growth, accounting for 18.3% of total revenue, signaling a strong rebound in cloud demand.
- Advertising Services showed the highest growth rate (+23.5%), continuing to be a high-margin revenue stream for the company.
- Operating Expense Anomalies:
- Other operating expense surged nearly tenfold (from 262 million to 2.875 billion USD). This is primarily due to the 2.5 billion USD settlement fee recognized this quarter related to the FTC litigation.
- Technology and infrastructure costs jumped 30.2%. This reflects aggressive investment in infrastructure for AWS and AI development, as well as increased depreciation from shortening the useful life of servers.
- Investment Gains and Net Income:
- Other income (expense), net recorded a massive 10.186 billion USD gain (compared to a 27 million loss last year). This was primarily driven by valuation gains from the investment in Anthropic, including a 7.2 billion USD upward valuation adjustment following the conversion of notes to preferred stock.
- Net Income grew significantly by 38.2% YoY. While operating income was flat due to legal and infrastructure costs, the bottom line was bolstered substantially by the non-operating investment gains from Anthropic.
Based on the Form 10-Q for the third quarter ended September 30, 2025, here is the Consolidated Balance Sheet for Amazon.com, Inc. comparing the financial positions as of September 30, 2025 (current quarter end) and December 31, 2024 (prior year-end).
Amazon.com, Inc. Consolidated Balance Sheets
(All amounts in millions USD)
| Assets | Sep 30, 2025 | Dec 31, 2024 | Change % |
| Current Assets | |||
| Cash and cash equivalents | $66,922 | $78,779 | -15.1% |
| Marketable securities | $27,275 | $22,423 | +21.6% |
| Inventories | $41,494 | $34,214 | +21.3% |
| Accounts receivable, net and other | $61,175 | $55,451 | +10.3% |
| Total Current Assets | $196,866 | $190,867 | +3.1% |
| Non-Current Assets | |||
| Property and equipment, net | $324,435 | $252,665 | +28.4% |
| Operating leases | $83,456 | $76,141 | +9.6% |
| Goodwill | $23,260 | $23,074 | +0.8% |
| Other assets | $99,904 | $82,147 | +21.6% |
| Total Assets | $727,921 | $624,894 | +16.5% |
| Liabilities & Equity | Sep 30, 2025 | Dec 31, 2024 | Change % |
| Current Liabilities | |||
| Accounts payable | $106,032 | $94,363 | +12.4% |
| Accrued expenses and other | $68,051 | $66,965 | +1.6% |
| Unearned revenue | $21,113 | $18,103 | +16.6% |
| Total Current Liabilities | $195,196 | $179,431 | +8.8% |
| Long-Term Liabilities | |||
| Long-term lease liabilities | $84,677 | $78,277 | +8.2% |
| Long-term debt | $50,742 | $52,623 | -3.6% |
| Other long-term liabilities | $27,675 | $28,593 | -3.2% |
| Total Liabilities | $358,290 | $338,924 | +5.7% |
| Stockholders’ Equity | |||
| Common stock | $112 | $111 | – |
| Treasury stock | $(7,837) | $(7,837) | 0.0% |
| Additional paid-in capital | $135,679 | $120,864 | +12.3% |
| Accumulated other comprehensive income (loss) | $12,333 | $(34) | N/A |
| Retained earnings | $229,344 | $172,866 | +32.7% |
| Total Stockholders’ Equity | $369,631 | $285,970 | +29.3% |
| Total Liabilities & Equity | $727,921 | $624,894 | +16.5% |
Key Analysis
- Capital Expenditure and Infrastructure Investment (PP&E):
- Property and equipment, net grew significantly by 28.4% (an increase of approximately 71.8 billion USD). This primarily reflects Amazon’s massive investment in technical infrastructure to support AWS growth and expansion of fulfillment network capacity. Furthermore, effective January 1, 2025, the company shortened the estimated useful life of certain servers and network equipment from 6 years to 5 years, which impacts depreciation.
- Investments and Other Assets:
- Other assets increased by 21.6% to 99.9 billion USD. This growth includes substantial investments in Anthropic. As of September 30, 2025, the valuation of Anthropic convertible notes held by Amazon was approximately 23.7 billion USD, and non-voting preferred stock was valued at approximately 14.8 billion USD.
- Accumulated Other Comprehensive Income (AOCI) shifted from a negative value to a positive 12.3 billion USD, mainly driven by unrealized gains on the Anthropic investment and valuation fluctuations in Rivian.
- Cash Flow and Debt:
- Cash and cash equivalents decreased by 15.1% to 66.9 billion USD, primarily utilized for massive capital expenditures (cash CAPEX reached 89.9 billion USD for the first nine months) and debt repayment.
- Long-term debt saw a slight decrease (-3.6%), indicating that the company is net-repaying some debt even while making large-scale investments.
- Working Capital Changes:
- Inventories rose by 21.3%, largely due to stocking up in preparation for the fourth-quarter holiday shopping season.
- Accounts payable increased by 12.4% accordingly, reflecting the higher volume of inventory procurement.
Anthropic is an American artificial intelligence (AI) safety and research company that has emerged as a primary competitor to OpenAI and Google. Founded in 2021 by former OpenAI executives, it focuses on building reliable, interpretable, and steerable AI systems.
Below is a detailed overview of Anthropic, its core technology, and its strategic importance to Amazon:
1. Origins and Mission
The company was founded by siblings Dario and Daniela Amodei, along with several other researchers who left OpenAI. Their departure was largely due to differing views on AI safety and the shift toward a more commercial focus at OpenAI. Anthropic operates as a Public Benefit Corporation (PBC), prioritizing the development of AI that is helpful, honest, and harmless.
2. Core Product: The Claude Family
Anthropic’s flagship product is Claude, a suite of large language models (LLMs).
- Current Models: The latest generation includes the Claude 3.5 and Claude 3 series. The lineup is typically categorized into three tiers: Haiku (fast/efficient), Sonnet (balanced), and Opus (most powerful).
- Key Strengths: Claude is highly regarded for its advanced reasoning, coding capabilities, and exceptional nuance in writing. It is particularly famous for its large context window, which allows users to upload and analyze massive documents or entire codebases in a single session.
3. Technical Innovation: Constitutional AI
One of Anthropic’s most significant contributions to the field is a methodology called Constitutional AI.
- How it works: Instead of relying purely on human feedback—which can be inconsistent—the model is trained to follow a specific set of rules or a “constitution.”
- Outcome: This allows the AI to self-critique its responses based on these principles, leading to models that are less likely to produce harmful or biased content while remaining highly functional.
4. Strategic Partnership with Amazon
As highlighted in the Q3 2025 financial report, Amazon is a major stakeholder in Anthropic.
- Investment: Amazon has invested billions into Anthropic, with its stake consisting of both convertible notes and non-voting preferred stock.
- AWS Integration: Anthropic’s models are a cornerstone of Amazon Bedrock, a service that allows AWS customers to build generative AI applications.
- Hardware Collaboration: Anthropic uses Amazon’s custom-designed AI chips (Trainium and Inferentia) to train and run its models, helping Amazon validate its hardware ecosystem.
5. Market Position
Anthropic is often seen as the “enterprise-favorite” AI company. While OpenAI captures a massive consumer audience with ChatGPT, Anthropic has built a strong reputation among businesses and developers who prioritize safety, data privacy, and the ability to process very long, complex datasets without losing focus.