The news: Amazon beat expectations in Q3, helped by an extended Prime Day sale, expanded rural access to same- and next-day delivery, and healthy cloud and advertising growth.

• Net sales rose 13% to $180.2 billion, ahead of the consensus estimate for $177.82 billion.
• Earnings per share of $1.95 beat expectations for $1.58, despite the company’s $2.5 billion settlement with the FTC and an additional $1.8 billion in expenses from its latest round of layoffs.
• Ad revenues jumped 24% YoY to $17.7 billion, outpacing estimates for $17.34 billion.

AI in the spotlight: Amazon’s AI investments are taking center stage as the company looks to improve efficiency, boost engagement, and keep third-party AI agents at bay.

• Amazon is integrating genAI throughout the customer experience with tools like Help Me Decide, its Rufus chatbot, Interests, and Amazon Lens. Those features are designed to guide shoppers to personalized product recommendations—and ultimately keep them tied to Amazon’s channels, and less likely to turn to external agents.
• 250 million customers have used Rufus this year, the company said, and those who use it are 60% more likely to make a purchase.
• Sellers are also benefiting from Amazon’s AI push. The company recently unveiled an enhanced version of its Seller Assistant, which uses agentic AI to automate mundane tasks like creating product listings and ad creation, as well as more complex functions like inventory management, planning, and product development.

Despite its high costs, AI is fast becoming a means for Amazon to reduce operating expenses across the organization.

• The company cited rapid advancements in genAI as a prime motivator for its decision to reduce corporate headcount by 14,000 jobs—the largest layoffs in Amazon’s history. Those cuts will be felt across the company, including in key profit generators like cloud computing and advertising, signaling the company’s confidence in genAI’s ability to make workers significantly more efficient.
• Amazon is also reportedly planning to use robots to replace over 500,000 jobs in its fulfillment network, per The New York Times. That would allow it to keep headcount flat even as it expects to double the number of products it sells by 2033.

Amazon’s retail performance: Amazon’s AI moves, while perhaps not as flashy as partnerships with platforms like ChatGPT, are helping the company deliver more value at a time when shoppers are being increasingly selective about what and where they buy.

As it has done consistently over the past two years, Amazon is hammering that point home with an array of promotions, including its recent Prime Big Deal Days sale and Holiday Beauty Event.

• But there are signs of deal fatigue. Amazon’s silence on Prime Big Deal Days’ performance could indicate weaker-than-expected results, either due to fiercer competition from rivals like Walmart and Target or softening consumer demand.
• Still, the company is confident that its value proposition will resonate with holiday shoppers. Amazon is hiring 250,000 seasonal workers this year, the same number as 2024, signaling that it expects results on par with last year’s strong showing.
• Amazon’s optimism tracks with our forecast, which expects the retailer to account for 42.3% of holiday ecommerce sales.

Our take: From a retail standpoint, Amazon is on firm footing. The retailer’s ability to offer unparalleled convenience, wide selection, and Prime membership perks are enabling it to gain share in an uncertain environment.

• While tariffs could become a bigger headwind next year, the company is so far navigating the complicated consumer environment with ease.