Behind the Numbers: Can Amazon Maintain Its Ad Revenue Momentum? Is AI Spending a Problem? And More — The 3 Big Questions for Amazon

Date: February 20, 2026
Host: Marcus (EMARKETER)
Guests: Rachel Wolf (Retail Analyst), Marissa Jones (Newsletter Analyst)

Episode Overview

This episode dives into the three most pressing questions surrounding Amazon as it enters 2026. The discussion revolves around Amazon’s ability to sustain its e-commerce growth, the sustainability and impact of its surging ad revenue, and whether its unprecedented spending on artificial intelligence is a problem or an essential strategy for long-term dominance. The analysts also weigh in on Amazon’s physical retail strategy, the evolving value proposition to advertisers, and workforce reductions, but ultimately focus on the core trio of questions shaping Amazon’s future trajectory.

Key Discussion Points & Insights

1. Can Amazon Keep E-Commerce Growth Going?

[03:02–06:34]

• Rachel underscores that Amazon’s 2025 e-commerce growth was the fastest since 2021, thanks in part to new “add to delivery” features, faster delivery options, and an improved grocery business.
  • Quote: “They really are doing all of these things to make...the service stickier. And I think that is something the company will have to keep doing—and it’s going to get harder...how many more of these can Amazon offer?” (Rachel, 03:02)
• Physical Retail Challenges: Marcus and Rachel note Amazon’s withdrawal from Fresh and Go stores, underscoring struggles in scaling physical grocery retail. While Whole Foods remains, their physical stores now represent only 3% of Amazon’s business.
• Experimentation Continues: Noteworthy is Amazon’s planned 229,000 sq. ft. supercenter and continued hybrid concepts—indicating experimentation, not retreat.
• Advertising Implications: Rachel poses that less physical presence could limit ambitions for in-store retail media, like dash-cart ads.
• Quote: “If they don’t have that physical footprint to back that up...” (Rachel, 07:15)

2. Can Amazon Sustain Ad Revenue Momentum and Compete with Meta & Google?

[07:21–12:08][16:39–18:36]

• Marissa highlights the boon in Amazon’s ad business—it’s the fastest-growing segment, but still only about 10% of revenue.
  • Quote: “Amazon's ad business is really accelerating, but is it powerful enough...to become a larger and more stable profit center, on the likes of what we see from Google and Meta?” (Marissa, 07:21)
• Growth Drivers:
  • AI-powered campaign solutions (full-funnel advertising).
  • Prime Video ads—launched recently, now reaching 315+ million viewers.
  • New tools: Campaigns Manager, AI-powered assistants for campaign management, and creative agents for ad content.
• Full Funnel Advantage: Amazon uniquely blends retail media and streaming, allowing for campaigns that follow users from awareness to conversion entirely on its platform.
  • Quote: “That is a benefit it has...users can really complete the entire process in one setting without leaving the Amazon website.” (Marissa, 08:59)
• Remaining Challenges:
  • The bulk of ad revenue still comes from sponsored placements in retail, not media.
  • Unclear if Amazon can convince non-vendors to advertise on Prime Video or other offerings.
  • Competing for advertisers with Meta and Google (the “triopoly”): Can Amazon differentiate via commerce-intent data and AI-driven value props?
  • Quote: “Is it its commerce intent data that will really draw in advertisers?” (Marissa, 17:52)

3. Is Amazon's AI Spending a Problem?

[12:08–16:11]

• CapEx Surge: Amazon plans to nearly double AI-related CapEx to $200 billion, part of a broader big-tech arms race (Google at $185B, Meta at $125B).
• Market Reaction: Investor sentiment has soured; stocks dropped 10% after the announcement. Yet, some analysts (Deutsche Bank) argue this is not true over-spending, but an acceleration of investment necessary for digital transformation.
  • Quote: “For Amazon, the risk of underinvesting is much greater than overinvesting.” (Marcus, paraphrasing Deutsche Bank, 14:04)
• Uncertainty: Both Rachel and Marissa flag the unknowns—
  • ROI on massive AI spend remains unproven, making it hard to justify to investors.
  • Questions remain around Amazon’s readiness for “Agentic Commerce” (AI-driven shopping) and whether consumers’ behaviors will support these innovations.
  • Quote: “How will they justify to investors that investing so heavily in AI is worthwhile and is leading to measurable results for their business?” (Marissa, 15:30)
• Ad Business Pressure: Growing ad revenue may be crucial as a funding source for these investments.

Additional Topics & Brief Notes

Agentic Commerce and Consumer Behavior

[16:39–17:48]

• Rachel questions if Amazon’s proprietary AI tools (like Rufus, Buy for Me) can keep shoppers engaged, or if consumers will migrate search/discovery to ChatGPT or Gemini.
  • Quote: “Are shoppers going to be content just using Amazon’s tools or are they going to start shifting...to ChatGPT and Gemini?” (Rachel, 16:39)

Workforce Reductions

[18:36–20:48]

• Marcus and Rachel discuss Amazon’s ongoing layoffs (30,000+ since October), with official reasoning tied to efficiency and bureaucracy reduction—not AI or financial strain.
• Notably, Amazon plans to replace up to 500,000 warehouse jobs with robots in coming years.

Notable Quotes & Memorable Moments

• Rachel: “They really are doing all of these things to make the experience of ordering on Amazon easier, to make the overall service stickier…” (03:02)
• Marissa: “Is Amazon's ad business powerful enough...to become a larger and more stable profit center, more on the likes of what we see from Google and Meta?” (07:21)
• Marcus: “For Amazon, the risk of underinvesting is much greater than overinvesting.” (14:04 paraphrased)
• Rachel: “There’s a lot of uncertainty about Amazon’s AI strategy...is Amazon ready to handle that sort of shift?” (15:00)
• Marissa: “How will they justify to investors that investing so heavily in AI is worthwhile and is leading to measurable results?” (15:30)
• Rachel: “Are shoppers going to be content just using Amazon’s tools, or are they going to start shifting...to ChatGPT and Gemini?” (16:39)
• Marcus: “Amazon’s stock was down about 10% the two weeks following the announcement, which is a lot on Amazon’s investor core.” (14:04)

Key Timestamps

• 03:02 — Can Amazon keep e-commerce growth going?
• 04:22–06:34 — Pullback from Fresh/Go, physical retail outlook
• 07:21 — Challenges to ad revenue sustainability and triopoly competition
• 08:59–10:59 — AI-powered ad solutions and full-funnel strengths
• 12:08 — Is AI capex a concern? Big-tech spending comparison
• 14:04–15:30 — Market/investor reaction and debate over spending
• 16:39 — Whether Amazon is ready for agentic/AI-driven commerce
• 18:36 — Ad value proposition vs. Google/Meta; “triopoly” deep dive
• 18:36–20:48 — Workforce reductions, automation, and efficiency strategy

Conclusion: The Three Big Questions for 2026

1. How can Amazon keep its core e-commerce growth engine running at full speed?
2. Can Amazon maintain its ad revenue momentum and effectively compete with Meta and Google?
3. Is Amazon’s massive AI spending strategic brilliance or a risk-laden problem?

These questions will frame Amazon’s strategic moves and market perception throughout the year ahead.