AWS Delivers 66% of Profit as Berkshire Eyes Increasing Amazon Stake
Berkshire Hathaway holds 10 million Amazon shares (0.8% of its portfolio) and could add shares under new CEO Greg Abel after net sales rose 13% YoY to $180 billion. In Q3 AWS drove 66% of operating profit on just 18% of sales, while advertising services likely deliver 30–40% operating margins.
1. Berkshire Hathaway May Boost Amazon Position Under New Leadership
Following Warren Buffett’s retirement at the end of 2025, incoming CEO Greg Abel is expected to take a more aggressive stance on technology investments. Berkshire Hathaway first acquired Amazon shares in 2019 and has built its stake to exactly 10 million shares, representing just 0.8% of its overall equity portfolio. Given Amazon’s outsized growth potential—especially in high-margin units like cloud computing and advertising—many analysts believe that Berkshire could increase its holding in 2026. A larger position would mark a shift from Buffett’s historically conservative approach to tech, reflecting Abel’s willingness to allocate more of Berkshire’s record cash balance toward fast-growing platforms with durable competitive moats.
2. Q3 2025 Results Highlight AWS Profit Engine and Advertising Momentum
In the third quarter of 2025, Amazon reported net sales of $180 billion, up 13% year-over-year. Its cloud computing division, Amazon Web Services (AWS), accounted for just 18% of sales but delivered 66% of the company’s total operating profit, underscoring AWS’s high margin profile. Advertising services also posted quarter-over-quarter growth that outpaced prior quarters, with industry estimates suggesting operating margins in the mid-30% to 40% range. Together, these two segments drove a reacceleration in operating profit after a modest start to the year, positioning the company for strong free cash flow generation heading into 2026.
3. Valuation at Recent Lows and Implications for Long-Term Investors
Amazon’s operating price-to-earnings ratio is currently trading at the lower end of its recent range, marking one of the most attractive entry points in several years. Traditional P/E metrics can be distorted by fluctuations in its investment portfolio gains and losses, so valuation based on operating earnings offers a clearer picture of core business profitability. With AWS and advertising expected to maintain robust margin expansion and with consensus forecasts projecting double-digit revenue growth in 2026, many investors view the current valuation as a compelling opportunity to add shares ahead of potential reacceleration in e-commerce and enterprise spending on AI infrastructure.