Amazon's Next Chapter: A Look Back at 2025 and What Investors Should Expect in 2026

Core Insights - Amazon enters 2026 in a stronger and more diversified position, with cloud computing, advertising, and AI driving its economic engine alongside retail [1][2] AWS Performance - AWS regained momentum in 2025, becoming Amazon's most important profit engine with revenue growth in the mid to high teens, driven by rising enterprise demand and AI workloads [4][5] - The company focused on custom silicon strategies, such as Trainium and Inferentia, to provide cost-efficient options for AI training and inference [5][6] - AWS's strategy involved powering the backend of AI adoption rather than competing for consumer-facing AI attention, enhancing customer stickiness and long-term opportunities [6] Advertising Growth - Amazon's advertising business became its fastest-growing segment in 2025, with annualized ad revenue exceeding $60 billion, surpassing retail and AWS [7][8] - The shift to an ad-supported tier for Prime Video and integration with Fire TV helped scale Amazon's streaming ads [8] - Expansion of partnerships with Netflix, Roku, and third-party publishers allowed Amazon to sell targeted ads beyond its own properties, positioning it as a broader adtech player [9] Retail Performance - Retail growth moderated in 2025 due to increased competition from Walmart, Temu, and Shein, but still showed strategic importance [10][11] - U.S. e-commerce revenue rose 11% in Q3 2025, while international markets like India and Brazil grew at 14% year-over-year [11] Expectations for 2026 - AWS is expected to enter an AI-driven acceleration phase, with AI workloads representing a larger share of revenue and strong demand for training and inference [13] - Advertising is anticipated to remain a key growth driver, with expansion in retail media, connected TV, and off-Amazon adtech [15] - Retail is expected to focus on efficiency rather than growth, with automation and improved personalization through AI [16][17] - Overall profitability could improve with stronger contributions from AWS and advertising, even if retail growth remains modest [17][18]