Amazon’s cost structure is dominated by cost of sales, which took 49.7% of net sales in 2025, followed by fulfillment at 15.2% and technology and infrastructure at 15.1%, according to its 2025 Form 10-K. Of $716.9 billion in 2025 net sales, $636.9 billion went on operating expenses, leaving $80.0 billion of operating income. The fastest-growing line is now technology and infrastructure, which holds the servers and data centres behind AWS and AI.
Mostly the purchase price of products Amazon sells itself, plus inbound and outbound shipping and some digital media content. Shipping costs alone were $102.7 billion in 2025, up from $95.8 billion in 2024.
02
Fulfillment: the warehouses
Operating and staffing fulfillment centres, physical stores and customer service, plus payment processing. It was $109.1 billion in 2025, 11% more than in 2024.
03
Technology and infrastructure: the servers
Engineering payroll plus servers, networking equipment and data centre depreciation that support AWS and the rest of Amazon. It rose 23% to $108.5 billion in 2025, driven mainly by infrastructure spending, including depreciation.
04
Marketing, admin and one-offs
Sales and marketing was $47.1 billion and general and administrative $11.2 billion in 2025. Other operating expense jumped to $4.6 billion, mainly because of the settlement of a lawsuit with the US Federal Trade Commission in Q3 2025.
What changed in 2025-26
AI capex now drives the cost base
Purchases of property and equipment, net of proceeds and incentives, were $128.3 billion in 2025 against $77.7 billion in 2024. For the twelve months to 30 September 2026 they reached $210.7 billion; Amazon says the increase primarily reflects investments in artificial intelligence (Amazon Q3 2026 earnings release).
Free cash flow fell to an outflow of $42.4 billion for the twelve months to 30 September 2026, from an inflow of $14.8 billion a year earlier. The capital spent today becomes depreciation inside technology and infrastructure costs over the following years.
Technology and infrastructure keeps climbing
In Q3 2026 technology and infrastructure costs were $34.8 billion, against $29.0 billion in Q3 2025. In 2025 the line nearly matched fulfillment as a share of net sales: 15.1% against 15.2%.
One-off charges in 2025
Operating income for 2025 included a $2.5 billion charge for the FTC settlement and about $2.7 billion of estimated severance costs for planned role eliminations, recorded mainly in technology and infrastructure, fulfillment and sales and marketing.
Read Amazon's margin by segment, not in total: in 2025 AWS earned $45.6 billion of the $80.0 billion operating income on $128.7 billion of sales.
Watch technology and infrastructure costs each quarter; they show how fast AI data centre spending turns into depreciation.
If you sell on Amazon, expect fulfillment and advertising costs to set your unit economics more than the referral fee alone.
When you compare Amazon with a pure retailer, separate shipping and fulfillment from cost of goods; Amazon reports them on different lines.
Treat 2025 one-offs, the FTC settlement and severance, as non-recurring when you model the cost base.
The Business Engineer lens
Amazon is running two cost structures at once: a logistics network where scale and efficiency lower the cost per package, and a computing business where AI demands capital ahead of revenue. The Business Engineer reads the gap between capital spending and free cash flow as the price of a seat in AI infrastructure, which pays off only if AWS demand keeps filling the capacity.
Because capital spending rose faster than operating cash flow: free cash flow was an outflow of $42.4 billion for the twelve months to 30 September 2026, which Amazon attributes mainly to AI investment.
The complete explainer, cleaned up and reformatted for mobile.
In 2022, both the North America and International segments of Amazon ran at an operating loss. For North America, of almost $316 billion in revenue, Amazon spent almost $319 billion in operating costs, an operating loss of about $2.8 billion in 2022.
For its International segment, of $118 billion in revenue, Amazon spent almost $126 billion to operate it. Thus, it reported a $7.7 billion operating loss.
Amazon turns $201B of sales into $27.5B of operating profit, and AWS earns most of it. Source: Amazon Q2 2026 earnings release (Form 8-K, SEC). Segment net sales and operating income as reported; costs calculated. Analysis by The Business Engineer.Drawing by The Business Engineer.
Company explainer · Amazon, explained
A 3-minute explainer of Amazon's business model and latest numbers, built from its SEC filings. Analysis by The Business Engineer.
How we source: figures on this page come from the company’s own filings (SEC 10-K, 10-Q and earnings releases, or its annual report), with the period stated next to each number. Last refreshed October 2026. Our methodology.
While for AWS, with $80 billion in revenue, Amazon spent $57 billion to operate it, thus generating almost $23 billion in operating income.
The high operating costs are primarily due to the high cost of running Amazon’s inventory and fulfillment infrastructure — as explored in the economics of AI compute infrastructure — behind its e-commerce operations. Indeed, Amazon is as much a physical player as a digital one.
Amazon's flywheel: lower prices bring traffic, traffic brings sellers, sellers bring selection. Source: Concept framework: Amazon's flywheel as described by Jeff Bezos; FourWeekMBA / The Business Engineer. Figures: Amazon Q2 2026 earnings release (SEC). Analysis by The Business Engineer.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
