On the desk today · Amazon
The marketplace takes a cut. The cloud charges rent. The ad sells the top of the page. Three tolls, one company.
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No matter who wins in November, three industries are already getting paid. → One has a $1 trillion budget request behind it. → Another just booked $5 billion in AI data-center orders in six months. → The third sits inside the 70% of the federal budget that’s legally “mandatory.” Most coverage skips these names. Our report doesn’t — and it’s free until midnight.
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The Store That Became
Three Toll Booths
In 1994, a 30-year-old named Jeff Bezos was working at D.E. Shaw, a hedge fund in New York City. He had read a statistic: internet usage was growing at 2,300% per year. He went to his boss and said he wanted to quit and sell books online. His boss told him it was a good idea — for someone who didn’t already have a good job. Bezos went home and applied what he later called the “regret minimization framework.” He asked himself: at 80 years old, would I regret not trying? The answer was yes. He quit the next day.
He drove to Seattle with his wife, MacKenzie, and set up a computer in the garage of a rented house in Bellevue, Washington. On July 5, 1994, he incorporated Amazon. The first book sold through the site shipped from that garage.
I ordered four items from Amazon last week. A phone case, a pack of batteries, a children’s book, and a bag of dog food. Two of the four were sold by Amazon directly. The other two — the phone case and the batteries — were sold by third-party sellers using Amazon’s marketplace. I didn’t notice the difference. The checkout was the same. The delivery was the same. But the economics were different. On the items Amazon sold, it earned a retail margin. On the items the third-party sellers sold, Amazon collected a commission — roughly 15% of the sale price — plus a fulfillment fee for storing, packing, and shipping the product. I paid one company. Amazon collected from two.
That marketplace — the platform where third-party sellers list their products alongside Amazon’s own inventory — generated $172 billion in third-party seller service fees in fiscal 2025. More than 60% of the units sold on Amazon are now sold by third-party sellers. Amazon doesn’t own the inventory. It doesn’t buy the product. It provides the platform, the customer, the logistics, and the trust — and takes a cut of every transaction.
Amazon went public on the Nasdaq on May 15, 1997, at $18 per share. In 2005, it launched Prime — the membership program that now counts more than 200 million subscribers. In 2006, it launched Amazon Web Services — a cloud computing platform that began as internal infrastructure and became the most profitable business in the company.
In fiscal 2025, Amazon reported $716.9 billion in total net sales — up 12.4% from the year before. Operating income was $80.0 billion. Net income was $77.7 billion — up 31% — a record. Operating cash flow reached $139.5 billion. Andy Jassy, who became CEO in July 2021 after running AWS, now leads the company from Seattle.
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That $128.7 billion from AWS — generating 57% of the company’s operating income from just 18% of its revenue — is the number that reveals what Amazon actually is. Most people think of Amazon as a retailer. It is — the largest on earth. But the profit engine is the cloud. AWS sells compute, storage, and networking to millions of customers — from startups running their first server to Netflix streaming to your television. When a company moves its data center to the cloud, it pays AWS monthly, for years, with automatic scaling that charges more as usage grows. AWS operating income was $45.6 billion in fiscal 2025 — well above the North America retail segment’s $29.6 billion. The bookstore became a cloud company. The cloud company subsidizes the store.
The second toll booth is advertising. In fiscal 2025, Amazon’s advertising services generated $68.6 billion in revenue. When you search for “running shoes” on Amazon, the first results are ads — sponsored products placed there by brands who paid for the position. Amazon is now the third-largest digital advertising platform on earth, behind only Google and Meta. The brilliance of the model is that the advertiser is also a seller on the platform. The brand pays Amazon to appear at the top of the page — and then pays Amazon again through the marketplace commission when the sale closes. Two tolls on a single transaction.
The stickiness runs in three directions. For consumers, Prime locks in the relationship — 200 million members who pay annually for free shipping, streaming, and more. For sellers, Amazon’s marketplace is where the customers are — leaving means abandoning the audience. For enterprises, AWS is embedded in the infrastructure — migrating off the cloud means rebuilding every application. Each layer reinforces the other two. More Prime members attract more sellers. More sellers attract more advertisers. More advertising revenue funds lower prices. Lower prices attract more Prime members. The loop compounds.
The flywheel — the term Bezos drew on a napkin in the early 2000s — has been spinning for three decades. In fiscal 2025, North America grew 10%. International grew 13%. AWS grew 20%. Advertising grew faster than any of them. And Amazon invested $104 billion in property and equipment in a single year — building the data centers, the warehouses, and the logistics network that make the next turn of the flywheel faster than the last.
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WHY THIS WORKS
Three toll booths compound together. Marketplace commissions ($172B in seller services), AWS ($129B in cloud revenue), and advertising ($69B) each collect a fee on a different activity. They feed each other — sellers buy ads, ads drive sales, sales fund infrastructure, infrastructure powers the cloud.
AWS is 18% of revenue but 57% of operating income. The cloud is the profit engine. High margins, recurring revenue, automatic scaling. AWS operating income of $45.6 billion exceeds the entire retail profit.
200 million Prime members are the audience every seller needs. The membership locks in the consumer. The consumer attracts the seller. The seller pays the commission. The advertising budget pays for the top of the search results. Every participant funds the next.
$139.5 billion in operating cash flow funds the next decade. Amazon generates more cash from operations than any company on earth. That cash builds the warehouses, the data centers, and the delivery fleet that no competitor can replicate at this scale.
Jeff Bezos was 30 when he quit his job at a hedge fund and drove to Seattle with a plan to sell books online. The garage in Bellevue, Washington, is still there. The bookstore is gone — replaced by a company that sells everything, hosts the world’s computing infrastructure, and runs the third-largest advertising platform on earth. Thirty-one years later, Amazon generates $717 billion in revenue, $78 billion in net income, and $140 billion in operating cash flow. The store became a marketplace. The marketplace became a cloud. The cloud became an ad platform. And the flywheel he drew on a napkin in the early 2000s is still spinning, faster than ever, powered by the three tolls that collect on every transaction, every server, and every search result that passes through the building he built.
