Amazon ads grow 26 per cent as Anthropic stake delivers a US$53 billion windfall

Amazon reported second quarter net sales of US$200.6 billion overnight, up 20 per cent year on year and the first time the company has cleared US$200 billion in a single quarter. Advertising services revenue rose 26 per cent to US$19.8 billion, the fastest growth of the year and quicker than the core retail business. AWS grew 37 per cent to US$42.2 billion, its fastest rate in 18 quarters.

The quarter's most striking number sat below the operating line. Net income of US$62.6 billion included US$53.4 billion in non-operating pre-tax income, primarily from Amazon's investments in Anthropic, the maker of Claude. Operating income, the cleaner measure of the trading business, rose 43 per cent to US$27.5 billion.

On the earnings call, chief executive Andy Jassy attributed ad growth to Sponsored Products, shopping activity inside Alexa+ and other conversational experiences, and live sport. He said shoppers who click a Sponsored Prompt convert to a sale 48 per cent more often, and that inventory across Thursday Night Football, NBA, WNBA and NASCAR sold out. Amazon has also expanded Ads Agent, its AI campaign planning and management tool, to 11 new countries this year, claiming 8 per cent lower cost per impression and 6 per cent lower cost per acquisition for advertisers using its targeting.

The growth is not free. Free cash flow swung to an outflow of US$7.6 billion on a trailing twelve month basis, driven by a US$66.1 billion year on year jump in property and equipment purchases, most of it AI infrastructure. Emarketer principal analyst Sky Canaves, quoted by AdNews, noted long-term debt has doubled since the end of 2025 and expects capex to finish well above the previous US$200 billion full-year estimate.

Why it matters for Australian marketers: Amazon Ads is now growing faster in percentage terms than Meta's ad business did in its own June quarter, and retail media is the channel where that growth lands locally. Australian advertisers weighing Amazon's local retail media offering are buying into a platform that is pouring profits into AI ad tooling, with Ads Agent style automation likely to reach this market quickly. The Anthropic windfall is also a reminder of how deeply the ad platforms and the AI labs are now financially entangled, which matters when assessing platform claims about AI performance.

Guidance for the September quarter is net sales of US$197 billion to US$202 billion, growth of 9 to 12 per cent, with the comparison distorted by Prime Day timing.