Amazon Ads Grew 12% in Q3 as AI Spending Drained $42.4 Billion in Cash

Amazon Ads revenue rose 12% year-over-year to $19.6 billion in the third quarter of 2025, the segment's slowest growth this year, while the company's broader AI buildout pushed free cash flow to negative $42.4 billion over the past twelve months. Amazon disclosed both figures in its Q3 earnings report on Thursday. The stock dropped 7% in after-hours trading.

Net income fell to $20.7 billion from $21.2 billion a year earlier. The gap reflects a missing windfall: last year's Q3 results included $9.5 billion in pre-tax gains from Amazon's investment in the AI startup Anthropic, and no comparable gain arrived this quarter.

CEO Andy Jassy framed the numbers differently for investors. "Our operating margins have long been strong on our core offering," Jassy said on the earnings call, adding that they are "rapidly improving on the AI side, too."

Why did the ad growth rate slow?

The 12% ad growth lags the rest of 2025. Amazon Ads grew 22% in Q1 and 26% in Q2. Jassy attributed the deceleration to scheduling, not demand. Amazon moved Prime Day out of Q3 and into Q2 this year, pulling a major shopping event out of the quarter's ad inventory. Q3 also included no NBA games on Amazon Prime Video, which removed another advertising surface.

For advertisers and agencies, what does this change for planning? The underlying trajectory remains double-digit, and the quarterly dip appears calendar-driven rather than structural. Still, anyone benchmarking Amazon Ads against Q1 and Q2 pace should adjust for the Prime Day shift before drawing conclusions.

AWS is carrying the AI story

AI demand remains the engine behind nearly all of Amazon's revenue increases this year. AWS, which provides AI and cloud computing infrastructure, grew 39.3% year-over-year — its fastest growth rate in nearly five years. Jassy told investors that businesses moving core workloads onto AWS could turn it into "a trillion-dollar revenue business in the next five to 10 years."

The spending side explains the cash flow figure. Amazon reported cash flow of negative $42.4 billion over the past twelve months, compared with positive cash flow of $14.8 billion in the prior year. The company has not slowed its AI infrastructure investment despite investor pressure for returns to keep growing.

New agentic tools, cautious agentic shoppers

Amazon is building its ads business around agentic AI. In September it launched Amazon Ads Agent, a merged platform combining the Amazon Ads console and Amazon DSP. Advertisers can launch full-funnel campaigns on it, and the system continually optimizes campaigns once they are live.

Consumer adoption of agentic shopping is another matter. "The natural question is whether agentic shopping from external horizontal agents is meaningfully impacting Amazon ads," Jassy said, "and the answer is no." He called agentic shopping "still not great" and said it is not meaningfully more convenient than humans completing one-click orders themselves.

His wording left the door open. "Few customers are doing much shopping this way yet," Jassy said — with "yet" carrying the weight. For ad buyers, that signals Amazon expects external AI agents to become a real traffic and conversion channel, and that the Ads Agent platform is its preparation for that shift.