Amazon (AMZN): The infrastructure tax on the digital economy

While investors obsess over which AI stocks to buy, one company has quietly positioned itself to profit from every AI workload, every product search, and every digital ad impression in the modern economy: Amazon. The 230,000-square-foot Orland Park store making headlines isn’t a retail play—it’s the physical manifestation of a company that stopped competing with Walmart years ago and started building the infrastructure every business pays to use. Amazon now collects what amounts to an infrastructure tax: fees on cloud computing (roughly 30-33% of the global market), e-commerce transactions (estimated at 38% of US online sales), and digital advertising (the third-largest platform globally).

The company’s real business isn’t selling products—it’s renting the pipes. And those pipes generated over $36 billion in free cash flow in 2024 with operating margins approaching 30% in its highest-margin segments, while retail operates at 4%. This article examines how Amazon monetizes infrastructure rather than inventory, why this model compounds like owning real estate in a growing city, and whether the stock’s premium valuation reflects the structural advantage of owning the economy’s plumbing.

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💰 The infrastructure tax: How Amazon really makes money

Amazon’s transformation is complete. The company doesn’t sell products anymore—it taxes economic activity.

The margin reveals the truth

AWS generated $105 billion in 2024 revenue with 30% operating margins. Advertising crossed $55 billion with margins estimated well above 50% (Amazon doesn’t disclose segment-level ad margins, but advertising is known to be extremely high-margin). Meanwhile, retail—the business most people still think of as “Amazon”—did $395 billion in revenue at 4% margins. Do the math: retail represents roughly 62% of revenue but generates a disproportionately small share of operating profit. The infrastructure businesses (AWS + ads) are about 38% of revenue but drive the majority of profit.

In other words, Amazon uses retail as a customer acquisition layer for its real business: charging other companies to access its infrastructure.

Every transaction gets taxed multiple times

When a third-party seller lists a product, Amazon collects:

• Referral fees: 8-15% of sale price

• Fulfilment fees: storage + shipping

• Advertising spend: to make the listing visible

• Payment processing: if using Amazon Pay

That’s four revenue streams from a single transaction; Amazon didn’t even have to stock inventory for. Third-party services now represent nearly 50% of retail revenue and carry 80%+ margins because Amazon provides infrastructure—warehouses, logistics, payment rails—that sellers must pay to access.

The AWS flywheel compounds it

Companies building AI applications need massive compute. Where do they go? AWS commands roughly 30-33% of the global cloud infrastructure market. Amazon’s Bedrock API—offering access to foundation models from Anthropic, Meta, and Amazon’s own Titan models—is seeing triple-digit growth. CEO Andy Jassy noted AWS has a “multi-billion-dollar AI revenue run rate” growing triple digits.

Here’s the compounding effect: AI applications built on AWS infrastructure feed back into Amazon’s ad targeting (improving campaign ROI for advertisers) and shopping assistance (Rufus, the AI shopping assistant, increases conversion rates). Amazon monetises the infrastructure to build the tools that drive more usage of the infrastructure.