Are Amazon's Subscription Services Becoming a Long-Term Growth Engine?

Amazon's AMZN subscription services are becoming one of its strongest and most stable growth drivers. This segment consists of Prime memberships, digital video, audiobooks, digital music and e-books. With enhanced content, faster delivery and bundled offerings, the company is turning its subscription ecosystem into a reliable source of long-term profitability. The success of Prime Day 2025, which set new records for sales and member sign-ups, highlights the growing strength of this model.

To expand the value of Prime, Amazon has introduced several new initiatives. The global rollout of Prime Video advertising and ad-free upgrade tiers is lifting average revenue per user. Additionally, the company announced new customization options for its Subscribe & Save program, allowing sellers to customize discounts and delivery schedules while using data-driven tools to identify customers more likely to make repeat purchases. These improvements help sellers build steady, recurring revenues and encourage long-term customer loyalty.

Live sports are also playing a role in expanding Prime’s reach. NASCAR broadcasts attracted around 2 million viewers per race, and the upcoming NBA season is expected to drive even higher engagement.

Amazon is further enhancing subscription value through artificial intelligence and automation. The launch of Alexa+, a generative AI-powered service available free for Prime members, offers a more personalized experience. In markets like India, the introduction of Prime Lite has made membership more accessible to a wider audience.

Per the Zacks' model, the segment is expected to grow 11.8% year over year by the end of 2025, supporting a 10.6% rise in overall sales and highlighting steady long-term momentum.

Amazon's Prime Faces Tougher Subscription Rivals

Walmart WMT, via Walmart+, has emerged as Amazon Prime’s closest rival in subscription services, offering free shipping, same-day grocery delivery, fuel discounts and Paramount+ streaming. Priced lower than Prime, it leverages Walmart’s vast store network for faster fulfillment and efficiency. With growing AI integration and a 2025 OpenAI partnership enabling ChatGPT-powered shopping, Walmart+ strengthens its edge in convenience, value and omnichannel reach against Amazon’s dominance.

Netflix NFLX remains a dominant force in subscription streaming, rivaling Amazon Prime Video with 300 million global subscribers in 2025. Netflix’s strength lies in its unmatched original content, global reach across 190 countries and rising ad-supported tier revenues. As Netflix moves toward profitability and expands advertising and live content, it intensifies competition with Amazon, further solidifying Netflix's reputation as the dominant pure-play subscription streaming leader.

AMZN’s Share Price Performance, Valuation & Estimates

Amazon shares have fallen 1.7% in the year-to-date period, underperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 6% and 5.6%, respectively.

AMZN’s YTD Price Performance

From a valuation perspective, AMZN stock is currently trading at a premium with a forward 12-month price/sales ratio of 3.01X, above the industry’s 2.23X. Amazon has a Value Score of C.

AMZN’s Valuation

The Zacks Consensus Estimate for AMZN’s 2025 earnings is pegged at $6.81 per share, unchanged over the past 30 days. This indicates a 22.15% increase from the figure reported in the year-ago quarter.

Amazon currently carries a Zacks Rank #2 (Buy). 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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