Amazon’s AMZN subscription services continue to deliver steady benefits to the company by increasing customer engagement and loyalty across its ecosystem. The segment includes Prime memberships, audiobooks, digital video, music and e-book services. Amazon highlighted the growing value of Prime as a key driver, particularly in reinforcing its online and physical retail offerings.
Amazon’s subscription services segment generated $11.7 billion in revenues in the first quarter, up 9.3% year over year. It contributed 7.5% to Amazon’s total revenues for the quarter. Our model estimate for 2025 subscription services revenues is pegged at approximately $49 billion, indicating year-over-year growth of 10.9%.
Amazon is refining its fulfillment network and regional delivery systems to speed up service. In the first quarter of 2025, Amazon reported record delivery speeds for Prime members, enabled by improved inventory placement.
Amazon remains focused on increasing the value proposition for subscribers. It reiterated its commitment to keeping prices low, improving delivery speed and expanding product variety. Prime Day 2025, scheduled for July 8-11, will play a central role in this strategy. With exclusive deals and early discounts for Prime members, Amazon expects to drive stronger engagement and spending through the event. The company also plans to continue investing in its Prime Video, shopping, and fulfillment network while leveraging AI to retain and attract subscribers.
Alexa+, which is smarter and more interactive, is now being rolled out for free for Prime members. Prime Day events will serve as another major boost, with exclusive access for members. These initiatives are designed to create a stickier subscription ecosystem.
AMZN Faces Stiff Competition in Subscription Services
Amazon’s subscription offerings, led by Prime, are facing growing pressure from rivals like Walmart WMT and Apple AAPL.
Walmart’s Walmart+ challenges Prime with benefits like free shipping, fuel discounts and same-day grocery delivery from stores. Meanwhile, Apple’s Services business, which bundles services like Apple TV+, Apple Music and Apple Arcade, as well as the growing user base of Apple Pay, has helped Apple achieve more than one billion paid subscribers.
While Walmart targets convenience and delivery speed, Apple focuses on entertainment and digital content. Both are expanding rapidly, offering consumers alternative ecosystems, putting pressure on Amazon to keep innovating and differentiating its subscription suite.
AMZN’s Share Price Performance, Valuation and Estimates
AMZN shares have gained 0.8% in the year-to-date (YTD) period, underperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 7.4% and 5.2%, respectively.
AMZN’s YTD Price Performance
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From a valuation standpoint, AMZN stock is currently trading at a forward 12-month Price/Sales ratio of 3.25X compared with the industry’s 2.17X. AMZN has a Value Score of D.
AMZN’s Valuation
Zacks Investment Research
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The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at $1.32 per share, which has been revised upward by a penny over the past 30 days, indicating 7.32% year-over-year growth.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. Price and Consensus Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote
Amazon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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