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Is Amazon Ads Set to Grow Even Bigger Through 2025 and Beyond?
AmazonAmazon(US:AMZN) ZACKSยท2025-06-12 17:46

Core Insights - Amazon's advertising business is experiencing significant growth, with revenues reaching $13.9 billion in Q1 2025, marking a 19% increase year-over-year [3] - The company is enhancing its ad platform with new AI-powered tools, including a video generator that showcases products in use, aiming to improve ad effectiveness and attract a wider range of advertisers [2][4][9] - Amazon Ads competes with major players like Meta and Alphabet in the digital advertising space, focusing on leveraging shopping data to deliver relevant ads [5][6] Advertising Performance - In Q1 2025, advertising services accounted for 8.9% of Amazon's total revenues, driven by an increase in brands utilizing its comprehensive ad services, which now reach over 275 million ad-supported users in the U.S. [3] - The advertising platform is expanding its reach across various channels, including Prime Video, Twitch, and live sports, to engage diverse audiences [9] Competitive Landscape - Amazon faces stiff competition from Meta, which leads in social media advertising, and Alphabet, which dominates search and video advertising [5] - Both Meta and Alphabet are also enhancing their ad tools with AI, indicating a competitive push in the digital advertising sector [6] Valuation and Estimates - Amazon's stock is currently trading at a forward 12-month Price/Sales ratio of 3.13X, compared to the industry's 1.98X, reflecting a relatively higher valuation [11] - The Zacks Consensus Estimate for Q2 2025 earnings is $1.34 per share, indicating an 8.94% year-over-year growth, while the estimate for 2025 earnings is $6.31 per share, reflecting a 14.1% year-over-year growth [13]