Transparent conducting oxides (TCOs) show unprecedented optical nonlinearities in the near infrared wavelength range, where the real part of their linear refractive index approaches zero. More specifically, the Kerr nonlinearities of these materials have sparked widespread attention due to their magnitude and speed. However, due to the absorptive nature of these nonlinear processes, it is of fundamental interest to further investigate the imaginary component of the nonlinear index. The present work studies the nonlinear optical absorption properties of aluminium‐doped zinc oxide (AZO) thin films in their near‐zero‐index (NZI) spectral window. It is found that the imaginary part of the refractive index is reduced under optical excitation such that the field penetration depth more than doubles. An optically induced shift of the NZI bandwidth of ≈120 nm for a pump intensity of 1.3 TW cm−2 is also demonstrated. Looking into the optically induced spectral redistribution of the probe signal, local net gain is recorded, which is ascribed to a nonlinear adiabatic energy transfer. The present study adds key information about the fundamental interplay between real and imaginary nonlinear indices in NZI media, while advancing parametric amplification as viable direction for loss compensation.