Intro
This post is based on the company’s official 10-K filing and investor relations (IR) materials. It summarizes only objective facts and the logical implications that directly follow from them. Personal opinions and forecasts have been minimized. The goal is to help readers understand and interpret the materials more easily.
Table of Contents
👉 1. Business Overview
👉 2. Financial Highlights
👉 3. Valuation
👉 4. Risk
👉 5. MD&A (Management’s Discussion and Analysis)
👉 6. Summary
1. Business Overview 💼
Amazon.com, Inc. (AMZN) describes its mission as aiming to be “Earth’s most customer-centric company.” In practice, Amazon serves multiple customer groups—consumers, sellers, developers, enterprises, content creators, and advertisers—through a mix of retail, services, and technology businesses.
“Amazon is built around customer-centric retail plus a global cloud platform (AWS), supported by subscriptions and advertising.”
🧩 What Amazon Actually Sells (Simple Map)
- Retail (Online + Physical Stores): Amazon sells products directly and also helps third-party sellers sell through Amazon’s stores. Amazon emphasizes selection, price, and convenience for consumers.
- Seller Services: Programs that help sellers grow, list products, and fulfill orders using Amazon’s services (think logistics and marketplace tools).
- Content & Creator Ecosystem: Tools and programs for authors, publishers, musicians, filmmakers, Twitch streamers, and developers to publish and sell content.
- AWS (Cloud Computing): On-demand technology services (like compute, storage, databases, analytics, and AI/ML services) for developers, companies, and institutions worldwide.
- Devices: Amazon also manufactures and sells electronic devices.
- Advertising: Ad products for sellers, vendors, publishers, authors, and others, including sponsored ads, display, and video.
- Subscriptions (Including Prime): Fees from Amazon Prime and access to digital content (video, audiobooks, music, e-books, and other non-AWS subscriptions).
🧱 Amazon’s Operating Segments (How the 10-K Organizes the Business)
Amazon groups its operations into three segments. This matters because investors typically analyze performance (sales, costs, operating income) through this lens.
| Segment | What it includes (in plain terms) | How to think about it |
|---|---|---|
| North America | Retail sales (including from sellers) plus advertising and subscription services through North America-focused online and physical stores. | Consumer business + seller ecosystem + monetization via Prime and ads. |
| International | Retail sales (including from sellers) plus advertising and subscription services through internationally-focused online stores. | Similar model outside North America, with regional complexity. |
| AWS | Global sales of cloud services such as compute, storage, database, and other services used by startups, enterprises, government agencies, and academic institutions. | Enterprise technology platform: usage-based services and long-term contracts. |
🔑 Two Beginner Concepts You’ll See Often
- Third-party seller = A business selling on Amazon’s marketplace (not Amazon selling the item directly). Amazon may earn fees for marketplace services and fulfillment.
- Cloud “compute” / “storage” (AWS) = Renting computing power and data storage over the internet, on demand—like paying for electricity as you use it, instead of building your own power plant.
🧾 Why Prime and Advertising Matter (Beyond Retail)
- Subscription services include Prime and digital content subscriptions. Prime is described as an evolving bundle of benefits delivered over the subscription period.
- Advertising services help sellers and brands get visibility through sponsored ads, display, and video advertising.
🟦 Plain English (Beginner-Friendly Recap)
Think of Amazon as three big businesses under one roof: (1) Shopping + logistics (online and physical retail, plus services for third-party sellers), (2) AWS (renting computing power and data services to organizations), and (3) Monetization layers like Prime subscriptions and advertising. Amazon’s 10-K reports results using the three segments—North America, International, and AWS—so most of the analysis in this series will refer back to that structure.
2. Financial Highlights 📊
Income Statement Snapshot
| (Unit: $m, EPS in $) | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Revenue (Sales) | 574,785 | 637,959 | 716,924 |
| Cost of Goods Sold (Cost of Sales) | 304,739 | 326,288 | 356,414 |
| Gross Profit (Gross Profit) | 270,046 | 311,671 | 360,510 |
| SG&A (SG&A) | 56,186 | 55,266 | 58,301 |
| Operating Income (Operating Income) | 36,852 | 68,593 | 79,975 |
| Non-Operating Income/Expense (Other income (expense), net) | 938 | (2,250) | 15,229 |
| Interest Income/Expense (Net interest) | (233) | 2,271 | 2,107 |
| Income Before Tax (Income before income taxes) | 37,557 | 68,614 | 97,311 |
| Income Tax (Provision for income taxes) | 7,120 | 9,265 | 19,087 |
| Net Income (Net income) | 30,425 | 59,248 | 77,670 |
| EPS (Diluted EPS) | 2.9 | 5.5 | 7.2 |
Plain English: Amazon grew sales each year (from $574,785m in FY 2023 to $716,924m in FY 2025) while also expanding operating profit sharply. Operating income nearly doubled from FY 2023 to FY 2024 and stayed strong in FY 2025. Net income and diluted EPS rose meaningfully, showing improved profitability alongside growth.
Key Ratios
| (Unit: %) | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Gross Margin (%) | 47.0% | 48.9% | 50.3% |
| Operating Margin (%) | 6.4% | 10.8% | 11.2% |
| Pretax Margin (%) | 6.5% | 10.8% | 13.6% |
| Net Margin (%) | 5.3% | 9.3% | 10.8% |
| ROE (%) | 17.5% | 24.3% | 22.3% |
| ROA (%) | 6.1% | 10.3% | 10.8% |
| ROTC (%) | 10.3% | 15.8% | 13.8% |
| ROIC (%) | 10.2% | 16.7% | 14.1% |
| Debt-to-Equity (%) | 76.6% | 51.7% | 41.3% |
| Net Debt/EBITDA (x) | 0.9x | 0.6x | 0.6x |
| Interest Coverage (x) | 11.6x | 28.5x | 35.2x |
| Current Ratio (%) | 104.5% | 106.4% | 105.1% |
| Quick Ratio (%) | 84.3% | 87.3% | 87.5% |
| Fixed Asset to Long-term Capital Ratio (%) | 60.5% | 60.6% | 63.3% |
Plain English: Margins improved meaningfully: operating margin rose from 6.4% (FY 2023) to 11.2% (FY 2025). Returns (ROE/ROA/ROIC) also strengthened, suggesting better profitability relative to the capital invested. Leverage appears more conservative over time (Debt-to-Equity fell to 41.3% in FY 2025), and debt burden looks manageable (Net Debt/EBITDA stayed around 0.6x in FY 2024–FY 2025, with strong interest coverage).
Balance Sheet Snapshot
| (Unit: $m) | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Assets | |||
| Cash & Equivalents | 73,387 | 78,779 | 86,810 |
| Accounts Receivable | 52,253 | 55,451 | 67,729 |
| Inventories | 33,318 | 34,214 | 38,325 |
| Total Current Assets | 172,351 | 190,867 | 229,083 |
| Property & Equipment | 204,177 | 252,665 | 357,025 |
| Intangibles | 30,480 | 31,680 | 32,470 |
| Total Assets | 527,854 | 624,894 | 818,042 |
| Liabilities & Equity | |||
| Accounts Payable | 84,981 | 94,363 | 121,909 |
| Total Current Liabilities | 164,917 | 179,431 | 218,005 |
| Short-term Debt | 18,950 | 16,940 | 16,950 |
| Long-term Debt | 135,610 | 130,900 | 152,990 |
| Total Debt | 154,560 | 147,840 | 169,940 |
| Total Liabilities | 325,979 | 338,924 | 406,977 |
| Total Equity | 201,875 | 285,970 | 411,065 |
| Total Liabilities & Equity | 527,854 | 624,894 | 818,042 |
| Net Debt | 81,173 | 69,061 | 83,130 |
Plain English: Amazon’s balance sheet expanded rapidly, with total assets rising from $527,854m (FY 2023) to $818,042m (FY 2025). Cash & equivalents increased steadily, while property & equipment grew sharply, reflecting heavy investment. Even with higher total debt, Amazon’s equity grew faster, and net debt stayed moderate relative to earnings capacity (also reflected in the Net Debt/EBITDA ratio above).
Cash Flow Snapshot
| (Unit: $m) | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Net Cash from Operating Activities | 84,946 | 115,877 | 139,514 |
| Net Cash from Investing Activities | (49,833) | (94,342) | (142,545) |
| Net Cash from Financing Activities | (15,879) | (11,812) | 9,661 |
| Net Change in Cash | 19,637 | 8,422 | 7,794 |
| Beginning Cash | 54,253 | 73,890 | 82,312 |
| Ending Cash | 73,890 | 82,312 | 90,106 |
Plain English: Operating cash flow strengthened each year, reaching $139,514m in FY 2025. Investing cash outflows became much larger, consistent with heavy reinvestment (especially in property and equipment). Despite that, ending cash still rose to $90,106m in FY 2025, showing that Amazon generated enough cash from operations to fund a big share of its growth investments.
Beginner Takeaways
1) Growth + profitability improved together. Revenue increased each year and operating margin expanded from 6.4% (FY 2023) to 11.2% (FY 2025), which is a strong sign of improving efficiency at scale.
2) Returns strengthened as earnings rose. ROE and ROA moved higher versus FY 2023, meaning Amazon generated more profit for each dollar of equity and assets.
3) Debt looks manageable relative to cash generation. Net Debt/EBITDA stayed below 1.0x, and interest coverage rose to 35.2x in FY 2025, suggesting comfortable ability to service interest costs.
4) Heavy reinvestment is the big theme. Investing cash outflows widened materially while property & equipment rose sharply, indicating Amazon is putting substantial capital back into the business to support future capacity and growth.
3. Valuation 📌
Here are the valuation ratios. These numbers don’t tell you by themselves if the stock is cheap or expensive. Investors typically compare them with peers, the broader market, or with their own view of intrinsic value (DCF). It’s up to each investor to judge whether these multiples signal undervaluation or overvaluation.
📊 Valuation Multiples Snapshot
| Metric | Company |
|---|---|
| P/E | 29.3 |
| Forward P/E | 25.5 |
| P/B | 5.5 |
| EV/EBITDA | 15.5 |
| P/S | 3.2 |
| Dividend Yield (%) | 0.0 |
| Free Cash Flow Yield (%) | 0.3 |
💡 Plain English Recap
What these numbers suggest (in beginner terms):
- P/E (29.3): The market is pricing Amazon at a higher multiple of recent earnings, which usually reflects expectations for strong future profit growth or high business quality.
- Forward P/E (25.5): A lower forward multiple than trailing P/E often implies investors expect earnings to grow (or margins to improve) going forward.
- P/S (3.2): For a company with massive revenue scale, this multiple often highlights that investors care less about sales volume alone and more about profitability and cash generation.
- EV/EBITDA (15.5): This is a common “enterprise-level” valuation lens. It’s often used to compare companies with different capital structures, especially when operating profit and depreciation are meaningful.
- P/B (5.5): A higher P/B is common for asset-light tech platforms, but Amazon also has major physical and infrastructure assets. This multiple is best interpreted alongside returns on capital and cash flow.
- Free Cash Flow Yield (0.3%): This is currently low, which can happen when a company is in a heavy investment cycle (large CapEx). Investors often watch whether future cash generation can expand as investment spending normalizes.
1) Forward P/E is shown as a consensus estimate (average from major financial data providers) for reference.
2) 2026-02-06
4. Risks ⚠️
Editorial Note: In order to enhance readability, we have omitted broad, market-wide risks that generally affect all companies. The discussion below focuses only on risks that Amazon itself highlights in its Form 10-K and that are specific to its business model and industry.
🛒 Dependence on Consumer Spending and Demand Shifts
- Amazon states that a large portion of its revenue depends on consumer spending, both online and in physical stores.
- If customers reduce discretionary spending or shift purchasing behavior, demand for Amazon’s products and services may decline.
Plain English: When consumers buy less or change where and how they shop, Amazon’s sales growth can slow.
📦 Complexity and Cost of Global Fulfillment and Logistics
- Amazon operates a massive fulfillment and logistics network, including warehouses, transportation, and last-mile delivery.
- The company notes risks related to rising labor costs, fuel costs, capacity constraints, and execution challenges across this network.
Plain English: Running fast delivery at global scale is expensive and complex. If costs rise faster than expected, profitability can be pressured.
☁️ AWS Growth, Competition, and Customer Usage Patterns
- AWS faces intense competition from other cloud service providers.
- Amazon highlights that AWS revenue depends on customer usage levels, long-term contracts, and customers optimizing or reducing cloud spending.
Plain English: Even though AWS is a major profit driver, customers can spend less or switch providers, which can slow growth.
🔒 Data Security, Cybersecurity, and Service Reliability
- Amazon identifies risks related to data security breaches, cyberattacks, and system outages.
- Disruptions to websites, cloud services, or digital platforms could harm customer trust and lead to financial or legal consequences.
Plain English: If systems go down or data is compromised, customers may lose confidence in Amazon’s services.
⚖️ Regulatory, Legal, and Antitrust Exposure
- Amazon operates in many jurisdictions and is subject to regulatory scrutiny, including competition, consumer protection, data privacy, and labor regulations.
- The company notes ongoing and potential legal and regulatory proceedings, including antitrust-related matters.
Plain English: New laws, fines, or restrictions could change how Amazon operates or increase compliance costs.
👥 Reliance on Third-Party Sellers and Partners
- A significant share of Amazon’s retail activity involves third-party sellers (independent merchants selling through Amazon’s platform).
- Amazon notes risks related to seller behavior, compliance, quality control, and fraud.
Plain English: If sellers provide poor products or misuse the platform, Amazon’s reputation and customer trust can be affected.
🎬 Content, Media, and Subscription Investment Risk
- Amazon invests heavily in digital content (video, music, and other media) and subscription offerings.
- The company highlights uncertainty around content costs, audience demand, and return on investment.
Plain English: Spending heavily on content does not always guarantee customer engagement or long-term returns.
🧩 Plain English Summary
Amazon’s key risks come from operating at massive global scale across retail, logistics, cloud computing, and digital services. The company highlights execution risk in fulfillment, competitive pressure in AWS, regulatory scrutiny, cybersecurity exposure, and reliance on consumer demand and third-party sellers. These risks are closely tied to how Amazon’s business model works and where it earns its revenue.
5. MD&A (Management’s Discussion and Analysis) 🧭
This section summarizes the key points management emphasizes in Amazon’s Form 10-K regarding operating performance, cash flow, and financial condition. The discussion reflects management’s own explanations and priorities, without additional interpretation or forward-looking judgment.
📈 Revenue Growth and Business Mix
- Management highlights continued revenue growth across product sales and service sales.
- Service sales (including AWS, advertising, and subscriptions) grew faster than product sales, increasing their share of total revenue.
- The company emphasizes that revenue performance varies by segment, with different demand patterns in North America, International, and AWS.
Plain English: Amazon points out that more of its growth is coming from services rather than just selling physical products.
⚙️ Operating Income and Cost Structure
- Management notes a significant improvement in operating income, driven by higher revenue and changes in cost structure.
- Key expense categories discussed include cost of sales, fulfillment, technology and infrastructure, and sales and marketing.
- The company explains that investments in efficiency, scale, and infrastructure affected operating expenses.
Plain English: Amazon explains that profitability improved as revenue grew and certain costs became more efficient relative to sales.
☁️ AWS Performance and Usage Trends
- Management emphasizes AWS as a major contributor to operating income.
- AWS results are described as being influenced by customer usage levels (how much customers consume cloud services) and long-term contracts.
- The company notes that customers may optimize or adjust cloud spending, affecting growth rates.
Plain English: AWS remains highly profitable, but its growth depends on how much customers actually use cloud services.
📦 Fulfillment, Logistics, and Infrastructure Investment
- Amazon discusses ongoing investment in fulfillment centers, transportation, and technology infrastructure.
- Management states these investments support faster delivery, service reliability, and long-term capacity.
- Capital expenditures are highlighted as a key use of cash.
Plain English: Amazon continues to spend heavily on warehouses, delivery networks, and technology to support its scale.
💵 Cash Flow and Liquidity
- Management highlights strong cash flows from operating activities.
- Cash generated from operations is described as funding investments, debt obligations, and general corporate needs.
- The company notes its focus on maintaining sufficient liquidity (ability to meet cash needs).
Plain English: Amazon says its core business generates enough cash to fund investments and meet financial obligations.
🧾 Financial Position and Capital Structure
- Management discusses the company’s debt levels, lease obligations, and equity position.
- The balance sheet reflects increased assets alongside changes in liabilities and shareholders’ equity.
- The company emphasizes access to capital markets and financial flexibility.
Plain English: Amazon explains how it balances debt, leases, and equity while keeping financial flexibility.
🟦 Plain English Summary
In management’s view, Amazon’s results reflect growing revenue, improving operating income, strong AWS contribution, and continued heavy investment in fulfillment and technology. The company emphasizes cash generation, liquidity, and balance sheet flexibility as key elements supporting its business strategy.
6. Summary ✅
Amazon’s FY 2025 results show a business that continues to grow at large scale while improving profitability. Revenue increased steadily, with service-based businesses such as AWS, advertising, and subscriptions playing a larger role in overall performance. Operating income and net income both rose meaningfully, indicating that cost structure and efficiency improved alongside growth. AWS remained a key contributor to operating income, while retail and logistics continued to require heavy investment. Cash flows from operations were strong enough to support significant spending on infrastructure and technology. At the same time, the balance sheet reflected growing assets, rising equity, and manageable debt levels. Overall, the data suggests a company focused on long-term capacity, operational scale, and financial flexibility.
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.
👉 Amazon (AMZN) FY 2025 10-K Key Highlights (Filed 2026) | Explained for Beginners