Amazon Q1 2025: Fulfillment, AI, and Retail Media Drive Growth Amid Tariff Uncertainty

Amazon met the top end of its Q1 2025 revenue forecast, posting $155.7 billion, in line with its projected range of $151–$155 billion. This strong performance was driven by its sharpened focus on inventory placement, which the company named its top operational priority, alongside record-breaking delivery speeds and elevated customer engagement. Additionally, Amazon’s advertising business continued its upward momentum, generating $13.9 billion in revenue, a 19% year-over-year increase, fueled by a robust full-funnel strategy that builds brand awareness while driving measurable conversion outcomes.

Q1 2025 Performance

Net Sales Growth

Amazon experienced a 9% year-over-year increase in net sales, reaching $155.7 billion, compared to $143.3 billion in the first quarter of 2024. 

North America's sales totaled $92.9 billion, reflecting an 8% growth rate. This expansion was attributed to growth in Everyday Essentials, which outpaced the rest of the business by twofold, an expanded product assortment, and enhancements in fulfillment speeds.

Advertising Revenue

Amazon Ads revenue reached $13.9 billion in the first quarter, demonstrating a year-over-year increase of 19%.  The platform achieved an ad-supported audience exceeding 275 million within the United States. 

AWS Revenue

AWS (Amazon Web Services): Revenue of $29.3 billion, a 17% year-over-year increase

Key Highlights

Fulfillment and Inventory Optimization – From Outbound to Inbound Excellence

In recent years, Amazon has made fulfillment optimization a central pillar of its operational strategy. In Q3 2024, the company reaped the benefits of its outbound regionalization model, achieving a 25% year-over-year improvement in inventory distribution. This strategy, focused on stocking products closer to the end consumer, enabled faster last-mile delivery and improved packaging efficiency. However, Amazon has not stopped at outbound improvements. In Q1 2025, the company implemented a major advancement with the re-architecture of its inbound network—the system by which products are received and distributed across its fulfillment centers. This marks a significant evolution in Amazon’s end-to-end logistics infrastructure, now designed to support both inbound and outbound regionalization for maximum efficiency.

CFO Brian Olsavsky underscored this shift during the Q1 2025 earnings call, declaring inventory placement as Amazon’s number one operational priority. The restructured inbound network allows a greater share of products to be positioned more strategically within fulfillment centers, resulting in:

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• Record-breaking delivery speeds globally for Prime members
• Highest-ever volume of same-day and next-day deliveries in a single quarter
• Lower delivery costs, supported by improved unit packaging density and reduced travel distance

This end-to-end optimization is not just an internal milestone; it has broad industry implications. As reported by Grocery Doppio, inefficient inventory visibility costs the grocery sector $7.4 billion annually. Amazon’s approach, anchored in regionalized fulfillment and data-driven inventory placement, offers a model of how to close these costly gaps.

Looking ahead, Amazon plans to deepen its investments in logistics innovation, including:

• Further refinement of its inbound network design
• Expansion of same-day delivery hubs
• Growth of its rural delivery station footprint
• Broad deployment of robotics and automation across facilities

Together, these initiatives reinforce Amazon’s transformation from a fast delivery platform into a fulfillment intelligence leader, capable of driving value through precise inventory control and next-generation logistics architecture.

Advertising Performance and Strategic Expansion

Amazon’s advertising business continued its impressive growth trajectory into Q1 2025. After delivering a robust $17.3 billion in Q4 2024, up from $14.3 billion in Q3, the company generated $13.9 billion in advertising revenue in Q1 2025, reflecting a 19% year-over-year increase. This brings Amazon’s advertising segment to a $69 billion annual run rate, more than twice the size it was four years ago.

This momentum is driven by a strong, full-funnel advertising offering spanning Prime Video, Twitch, live sports, Amazon Music, IMDb, and external platforms like Pinterest and BuzzFeed. Amazon also continues to refine its measurement capabilities with enhanced DSP tools and clean rooms for better campaign optimization.

In Q1 2025, Amazon expanded its retail media functionality with the launch of ‘Interests’, an AI-curated product discovery tool, and ‘Buy for Me’, a checkout feature that simplifies purchases on third-party websites via the Amazon app. These tools enhance discoverability and ease of transaction, contributing to Amazon’s 275 million+ ad-supported audience in the U.S., a scale few competitors can match.

According to Grocery Doppio, the U.S. retail media network market is projected to reach $54 billion in 2024, with $8.5 billion coming from grocery retail media alone. Amazon’s strategic moves anchored in personalization, omnichannel presence, and data-rich insights position it as a key beneficiary of this rapidly maturing retail media ecosystem.

Generative AI and AWS Innovation
Amazon Web Services (AWS) reported revenue of $29.3 billion in Q1 2025, a 17% increase year-over-year. The growth is driven by the adoption of generative AI services and the ongoing migration of on-premises infrastructure to the cloud. AWS's annualized revenue run rate now stands at $117 billion. Amazon is investing heavily in AI capabilities, including the development of custom silicon like Trainium chips, to support the growing demand for AI services.

Future Outlook

For Q2 2025, Amazon expects net sales to be between $159.0 billion and $164.0 billion, representing a 7% to 11% increase compared to Q2 2024. Operating income is projected to be between $13.0 billion and $17.5 billion, compared to $14.7 billion in the same quarter of the previous year. The guidance reflects potential impacts from foreign exchange rates and ongoing tariff uncertainties.