The news: Amazon reported strong Q2 results for its advertising business, with advertising revenues reaching $15.6 billion—up a significant 23% YoY. Net sales increased 13% YoY to $167.7 billion, well above Q2 guidance that warned of “tariffs and trade policies” and “recessionary fears.”

Amazon also provided Q3 guidance, estimating income guidance of $15.5 billion to $20.5 billion—pointing to lingering tariff and AI spending concerns and causing shares to slide nearly 8% in pre-market trading Friday.

Amazon highlighted several big successes that likely contributed to Q2 growth: Its biggest Prime Day ever, the launching of generative AI tools to improve the shopping experience, and the expansion of several AWS offerings and agreements with major companies.

Building on momentum: Amazon will likely continue expanding its ad ecosystem across devices, formats, and physical spaces—but what will growth look like?

• Retail media expansion beyond its site. Amazon’s core ad real estate—search and display within its own marketplace—is increasingly saturated, requiring the company to expand its reach off-platform. Expect Amazon to double down on its demand-side platform to help advertisers target consumers outside of Amazon-owned properties and position Amazon as a more direct competitor with Google Display Network and Meta Audience Network.
• A bigger push into generative AI. Investments in genAI for ad creation and performance optimization a la Meta will help reduce friction for advertisers and drive new ad spending. Expect Amazon to leverage its extensive first-party shopper data to anticipate customer needs and serve hyper-relevant ads while scaling genAI for ad creative.