Dive Brief:

• Amazon’s revenue generated from advertising rose 19% year over year to $13.92 billion in Q1, according to an earnings statement. Performance for the segment beat expectations. 
• Discussing the results with analysts, executives noted that advertising continues to be an important profit driver in North America. CEO Andy Jassy said Amazon’s full-funnel offerings reach an average audience of more than 275 million ad-supported consumers in the U.S., providing insights into reach. 
• The earnings landed ahead of Amazon’s NewFronts and spring upfront showcase, where the company will hawk its latest programming and ad products to marketers. But the upfronts, where advertisers broker large spending commitments with platforms and publishers, arrive during a period of high uncertainty stemming from tariffs. 

Dive Insight:

Amazon delivered uneven results in Q1, with its cloud-computing business missing Wall Street’s targets and a disappointing income forecast for the current quarter. Advertising again showed its strengths, however, experiencing a rate of growth outpacing digital rivals like Google and Meta. Whether the segment will remain as resilient and continue to bolster profits could be tested if tariffs more severely impact marketers’ spending priorities. 

Brands tend to invest more in performance marketing channels in a downturn, and Amazon has an expansive retail data set and measurement capabilities that further shore up its appeal. The earnings report additionally gave a peek into Amazon’s audience scale, with its ad-supported offerings reaching an average of more than 275 million people in the U.S. alone. 

That said, acting as both a massive e-commerce marketplace and ad solutions provider presents a bit of a conundrum when it comes to the potential impact of tariffs, according to analysts. 

“If Amazon’s Seller costs rise due to tariffs, those sellers will likely need to increase prices which many already have done. That provides less margin for those sellers to spend on advertising those products,” said Brad Jashinsky, a director analyst at Gartner, in emailed comments. “At the same time, if consumer demand begins to fall, then over half of Amazon’s sales come from their third-party marketplace which provides significantly more flexibility than retailers without a marketplace that are dependent on sourcing products directly from suppliers.”

Jashinsky also noted that Amazon is “well positioned” to capture ad dollars from brands pouring more into performance due to its “strong in-market audiences and attribution.”  

Tariffs have yet to have a noticeable chilling effect on digital advertising platforms, and companies are approaching the situation with varying degrees of caution. Snapchat, which is far smaller than Amazon and more reliant on advertising, pulled its Q2 earnings forecast earlier this week. Agencies have not yet seen a meaningful disruption to client spending patterns, though some have acknowledged that will probably change. 

A strategic focus for Amazon is refining a full-funnel platform that can “appeal to brands of all sizes,” according to CEO Jassy. Amazon since last year has ramped up advertising initiatives on its Prime Video streaming service, catering to deep-pocketed and nonendemic brands seeking premium content like live sports from the NBA and NFL. 

Those types of rights deals will likely be in the spotlight as Amazon prepares for its second upfronts showcase on May 12 (the company is separately presenting at the more digitally-oriented NewFronts next week). The general upfronts season, typically a dealmaking bonanza, could give a better temperature check on the industry as it navigates another moment of global chaos.