As people have suggested, on some people they probably make money off prime (the small time users), and on others they make it up in quantity of stuff purchased

As people have suggested, on some people they probably make money off prime (the small time users), and on others they make it up in quantity of stuff purchased. For instance, Amazon Prime (Student) was free for a year last year, now it's free for 6 months. From this we can guess that a year was overly generous and they didn't make enough money off of that through the increase in purchase volume. Additionally, Amazon has significant deals with their shipping carrier for the mass quantity of things they ship out. This reduces their shipping costs. The other component that reduces their shipping cost is the warehouse locations. Newegg used to (still does?) aim to get their packages delivered in 2 days. Their warehouses were strategically set up for that, and even if you ordered 3 day shipping you could get it in 2 days, it just wasn't guaranteed. I'm sure Amazon's warehouse layout is similar where most items reasonably get to their location in 2 days via cheaper shipping, and they can just pay for the extra SLA for the packages that might not.