Amazon is increasing growth and operating profit, with AWS as a powerful profit engine. However, AI infrastructure spending is rapidly reducing free cash. The mechanical 74/100* score must be read with the data-mapping warning; it is not a clean investment grade.
How does Amazon make money?
Amazon earns revenue from product sales, third-party seller fees, Prime subscriptions, advertising and AWS cloud services. Retail is very large but lower margin; AWS produces much higher operating profit from a smaller revenue base.
What do the FY2025 financials show?
Net sales rose 12% to $716.9 billion, operating income reached $80.0 billion and net income $77.7 billion. AWS sales grew 20% to $128.7 billion and AWS operating income reached $45.6 billion.
Operating cash was $139.5 billion, but net equipment purchases rose to $128.3 billion, leaving official free cash of only $11.2 billion. The large gap shows that AI and cloud capacity consumes cash today in expectation of future returns.
How should the five categories be read?
Growth 91/100: Five-year revenue growth is about 11.1% and sales rose in every reviewed year. Net-income growth is also strong, though investment gains and the economic cycle should be separated.
Profitability 37/100: Operating margin is 11.2% and approximate return on capital 16.1%. The model's 0.8% gross-margin input does not properly reflect Amazon's mixed product-service model; the company also considers operating income more meaningful.
Cash flow 96/100 model result: This category is not reliable. The 10-K's $11.2 billion of free cash is far below the automated input. The long-term question is whether rising infrastructure spending converts into durable AWS and advertising profit.
Balance sheet 73/100: A 1.05 current ratio, net-cash position and approximately 25-times interest coverage limit debt pressure. Working capital moving faster than sales needs monitoring.
Shareholder policy 58/100 model result: Stock compensation is about 2.7% of revenue. The automated 114% share-growth figure is wrong, so its dilution conclusion is not used. Amazon directed most FY2025 cash toward infrastructure.
Critical combinations
- AWS growth + high AWS profit
- Advertising and seller services + scale
- Operating cash + net-cash balance sheet
- AI investment + falling free cash
- High expectations + uncertain capacity returns
- Retail scale + low margin
Q2 2026 current context
Q2 sales rose 20% to $200.6 billion and operating income increased 43% to $27.5 billion. AWS sales grew 37%. Yet trailing-twelve-month free cash turned into a $7.6 billion outflow, mainly because equipment purchases increased $66.1 billion year on year.
Most of Q2's large net-income increase came from $53.4 billion of pre-tax other income, primarily from Anthropic investments. This should be read separately from core operating performance.
Amazon's growth and AWS profitability are strong; the central long-term test is whether enormous AI investment converts into sustainable free cash. Because of the data warning, official cash flow matters more than the score. This is not investment advice.
Where the figures come from
- Amazon FY2025 Form 10-K, SEC — fiscal year ended 31 December 2025; primary score period.
- Amazon Q2 2026 Form 10-Q, SEC — interim period ended 30 June 2026.
- Amazon Q2 2026 results — official current context.
- The 74 score is the mechanical result after capping each of the 15 measures at its weight. The model's $132.8 billion FY2025 free-cash and 114.3% share-growth inputs conflict with the 10-K. Official figures are $11.2 billion of free cash and about 10.6 billion weighted-average basic shares; the bad inputs are not used in the interpretation.