Amazon's Q2 Earnings: Cloud Growth, AI Investments, and E-commerce Resilience in Focus

Amazon still the online retailer of choice as cloud business faces competition

July 30 (Reuters) - Amazon (AMZN.O), opens new tab will seek to reassure investors on Thursday that its cloud business, a critical driver of profits, is growing at a fast enough clip to offset any pullback in consumer spending that could throttle its retail operations. The tech giant's revenue likely increased 9.5% in the second quarter to $162.08 billion, according to data from LSEG, accelerating from the first quarter and largely in line with the year-ago period. Amazon Web Services (AWS), the cloud unit that accounts for less than a fifth of the company's sales but typically about 60% of its profit, likely grew 17% in the April-June period. Amazon, like its rivals Alphabet (GOOGL.O), opens new tab and Microsoft (MSFT.O), opens new tab, has invested heavily to increase capacity at its data centers to meet demand for its traditional cloud services as well as the surge in generative AI services. While AWS and Microsoft's Azure are the dominant cloud providers, Alphabet's Google has recently bagged some big deals, including one with OpenAI, and last week it cited massive demand for its cloud services for boosting spending plans for the year. Google's strong performance has sparked worries that the company could be taking market share from AWS, which analysts said could prompt Amazon to increase its own capital expenses as well, as could Microsoft when it announces its results on Wednesday. "We have heard murmurs that AWS' struggle to develop a strong AI model has fueled a perception that it is trailing behind Google within AI development," Scotiabank analysts said, adding they expect margins at AWS to also pull back from the 39.5% seen in the first quarter. On Thursday, though, investors will pay more attention than usual to Amazon's e-commerce business, which has so far well withstood the pressures stemming from U.S. President Donald Trump's tariff threats and trade deals. Sellers still prefer to hawk their wares on Amazon.com, as the e-commerce giant has cemented the top spot in offering low prices, convenience, and product selection. Amazon said in May that third-party sellers on Amazon.com were pulling forward orders to boost inventory, and the company was pushing them to keep prices as low as possible. Walmart (WMT.N), opens new tab, the world's largest retailer, said in May it would start raising prices due to tariffs. "Amazon remains the go-to destination for online deals and continues to draw strong consumer and brand engagement ... price increases have been more muted than expected, and second-quarter sales were solid as consumer spend stayed resilient," Jefferies analyst Brent Thill said. Inventory levels also "appear healthy" across most sellers on Amazon heading into the key back-to-school and holiday shopping seasons, Thill added. Many consumer-facing companies have warned that tariffs are hitting their business. Automakers and consumer food giants including Coca-Cola (KO.N), opens new tab have indicated that some segments of the buying public have pulled in their spending. While major retailers slowed or halted orders for China-made goods and discretionary merchandise earlier in the year, brands are expecting improvements in sales in the current quarter as trade negotiations settle, analysts said. Evercore analysts said a survey conducted by the brokerage found that 95% of respondents picked Amazon as their most common go-to website for shopping online this year. That represented an increase of 5% from 2024. Preference for the No. 2 and No. 3 rivals - Walmart (WMT.N), opens new tab and Target (TGT.N), opens new tab - declined 7% and 3%, respectively. "While tariff uncertainty creates a challenge for Amazon and every other retailer, our strong belief is that given its scale, supply diversification, and logistics sophistication, Amazon will be better able to manage tariff challenges than practically any other company," Evercore analysts said. Reporting by Deborah Sophia in Bengaluru and Arriana McLymore in New York; Editing by Sayantani Ghosh and Maju Samuel Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence Arriana McLymore Thomson Reuters Arriana McLymore is a New York-based reporter covering e-commerce, online marketplaces, alternative revenue streams for retailers and in-store innovation. She previously reported on telecoms and the business of law.

Amazon Q2 earnings preview: AI bets, cloud growth, and tariff changes in the spotlight

Amazon's infrastructure investments and cloud business will go under the microscope Thursday when the company reports second-quarter financial results -- with Wall Street looking for signs that the tech giant's big bet on artificial intelligence is translating into growth. The company disappointed investors in May with a softer-than-expected forecast for Q2 operating profits, but analysts are more optimistic heading into the earnings report. Wedbush analysts cited "encouraging US retail data, healthy advertiser sentiment, strong AWS demand, and continued efficiency gains across the business that should drive upside to margin expectations," in a July 30 research report previewing Amazon's earnings. Here are the latest Wall Street estimates, according to Yahoo Finance: * $162.1 billion in revenue, up 9.5% from a year ago * Earnings of $1.33 per share, up 5.6% from the same period last year Analysts' projections would put Amazon near the midpoint of its prior revenue forecast and toward the high end of its projected operating income range. One reason for the optimism: The tariff outlook has improved since last quarter, contributing to a more bullish tone from analysts. For example, Morgan Stanley raised its 2026 earnings estimate for Amazon from $7.35 to $8.00, citing a "more manageable" trade environment. Amazon still generates the largest portion of its net sales from online stores, which accounted for about $57 billion or 37% of total net sales in the first quarter of this year. The annual Prime Day sales event took place after the quarter ended, from July 8-11, so the results won't be included in the numbers, but Amazon executives are likely to provide a few additional details potentially indicating how the results will impact third-quarter earnings. The company makes most of its operating profits from Amazon Web Services -- about $11.5 billion in the first quarter, or 63% of Amazon's total operating profits of $18.4 billion. AWS revenue rose 16.9% to $29.3 billion in Q1, taking the cloud unit's annual revenue run rate to a record $117 billion. The growth "speaks to the durability of the business even through GPU-related supply constraints that are expected to ease in 2H," Morgan Stanley analysts wrote, referring to shortages in the key chips for training and running AI models. Like other tech giants, Amazon is spending big to build out infrastructure for AI and cloud services. Morgan Stanley raised its 2025 and 2026 Amazon capital expense forecasts to $111 billion and $134 billion, respectively -- up 6-7% from prior estimates -- with the majority going toward technology and infrastructure. Other areas to watch: Amazon's Project Kuiper satellite internet venture, its partnership and investment in AI startup Anthropic, and whether the company signals further increases in capital spending as it races to build out infrastructure for the next phase of generative AI. Check back Thursday afternoon for full coverage.

Amazon Web Services revenue expected to grow due to AI

Amazon will report its second-quarter earnings after the market closes on Thursday, and analysts expect revenue from its cloud computing business to surge. According to consensus among Visible Alpha analysts, Amazon's total revenue is expected to grow 9.5% year-on-year to $162.2 billion. This falls at the mid-range point of Amazon's own guidance of $159-$164 billion. Operating income is forecast at $16.7 billion, marking a 13.8% jump from the same period last year, according to IG analysts. Amazon's own guidance for its operating income ranges from $13.0-17.5 billion. Analysts also project earnings per share to increase to $1.33, according to Investopedia, a year-on-year increase of around 6%. Off a positive outlook for expected revenue, all 25 analysts tracked by Visible Alpha give Amazon's stock a "buy" or equivalent rating, with an average price target of $249. This would surpass Amazon's previous record close of $242 in February. Shares in Amazon currently trade around $232, up nearly 6% year-to-date. Analysts expect robust growth from the company's online retail business and cloud service, Amazon Web Services (AWS). The generative artificial intelligence boom is a windfall for AWS, as it provides cloud computing for AI companies like Meta and Anthropic. Last quarter, AWS sales accounted for about half of net income. Powered by "AI infrastructure demands and AI adaptation," IG analysts expect AWS and the company's advertising segments "will continue as the growth engine for Amazon's business." Echoing this, AWS revenue is expected to be around $30.7 billion, a year-over-year increase of 17%, according to Visible Alpha consensus. Advertising segments are expected to grow by the same amount according to IG. "The company's vast customer database provides rich material for improving advertising algorithms and targeting, which could drive higher margins through better conversion rates and increased advertiser spending," wrote IG analyst Fabien Yip. Meanwhile, Amazon's online marketplaces, which account for one-third of total revenue, are forecast to grow at a more modest 6%, according to Visible Alpha analysts, with tariffs on U.S. imports weighing on the retail outlook. Nonetheless, North America retail operating margin has increased significantly from a meager 1.1% at the beginning of last year to an estimated 5.98% for Q2. "Market participants will closely monitor e-commerce sales for clues about consumer sentiment amid the current global environment of heightened uncertainties," said Yip. Indeed, management noted that the range in its forecasting is because the figures anticipate a range of uncertainties such as "foreign exchange rates, changes in global economic and geopolitical conditions, tariff and trade policies, and customer demand and spending (including the impact of recessionary fears)." Its revenue projection, for example, accounts for an "unfavorable impact" of approximately 10 basis points from foreign exchange rates, in light of the U.S. dollar's continued decline this year, having fallen almost 11% in the first half of the year, against a basket of currencies.

Amazon Still the Online Retailer of Choice as Cloud Business Faces Competition

By Arriana McLymore and Deborah Mary Sophia (Reuters) -Amazon will seek to reassure investors on Thursday that its cloud business, a critical driver of profits, is growing at a fast enough clip to offset any pullback in consumer spending that could throttle its retail operations. The tech giant's revenue likely increased 9.5% in the second quarter to $162.08 billion, according to data from LSEG, accelerating from the first quarter and largely in line with the year-ago period. Amazon Web Services (AWS), the cloud unit that accounts for less than a fifth of the company's sales but typically about 60% of its profit, likely grew 17% in the April-June period. Amazon, like its rivals Alphabet and Microsoft, has invested heavily to increase capacity at its data centers to meet demand for its traditional cloud services as well as the surge in generative AI services. While AWS and Microsoft's Azure are the dominant cloud providers, Alphabet's Google has recently bagged some big deals, including one with OpenAI, and last week it cited massive demand for its cloud services for boosting spending plans for the year. Google's strong performance has sparked worries that the company could be taking market share from AWS, which analysts said could prompt Amazon to increase its own capital expenses as well, as could Microsoft when it announces its results on Wednesday. "We have heard murmurs that AWS' struggle to develop a strong AI model has fueled a perception that it is trailing behind Google within AI development," Scotiabank analysts said, adding they expect margins at AWS to also pull back from the 39.5% seen in the first quarter. On Thursday, though, investors will pay more attention than usual to Amazon's e-commerce business, which has so far well withstood the pressures stemming from U.S. President Donald Trump's tariff threats and trade deals. Sellers still prefer to hawk their wares on Amazon.com, as the e-commerce giant has cemented the top spot in offering low prices, convenience, and product selection. Amazon said in May that third-party sellers on Amazon.com were pulling forward orders to boost inventory, and the company was pushing them to keep prices as low as possible. Walmart, the world's largest retailer, said in May it would start raising prices due to tariffs. "Amazon remains the go-to destination for online deals and continues to draw strong consumer and brand engagement ... price increases have been more muted than expected, and second-quarter sales were solid as consumer spend stayed resilient," Jefferies analyst Brent Thill said. Inventory levels also "appear healthy" across most sellers on Amazon heading into the key back-to-school and holiday shopping seasons, Thill added. Many consumer-facing companies have warned that tariffs are hitting their business. Automakers and consumer food giants including Coca-Cola have indicated that some segments of the buying public have pulled in their spending. While major retailers slowed or halted orders for China-made goods and discretionary merchandise earlier in the year, brands are expecting improvements in sales in the current quarter as trade negotiations settle, analysts said. Evercore analysts said a survey conducted by the brokerage found that 95% of respondents picked Amazon as their most common go-to website for shopping online this year. That represented an increase of 5% from 2024. Preference for the No. 2 and No. 3 rivals - Walmart and Target - declined 7% and 3%, respectively. "While tariff uncertainty creates a challenge for Amazon and every other retailer, our strong belief is that given its scale, supply diversification, and logistics sophistication, Amazon will be better able to manage tariff challenges than practically any other company," Evercore analysts said. (Reporting by Deborah Sophia in Bengaluru and Arriana McLymore in New York; Editing by Sayantani Ghosh and Maju Samuel)

Amazon's AI-Powered AWS, Efficiency Gains, And Consumer Demand Fuel Bullish Q2 Outlook - Amazon.com (NASDAQ:AMZN)

Amazon.com AMZN is poised to potentially outperform market expectations in its July 31 second-quarter earnings report, driven by a combination of robust U.S. retail sales, advantageous foreign exchange rates, and accelerating demand for its artificial intelligence-related services through Amazon Web Services (AWS). Strong consumer spending and ongoing efficiency gains in its e-commerce operations are also contributing to a positive outlook for the tech giant. Reinforcing this positive sentiment, Bank of America Securities analyst Justin Post maintained Amazon.com AMZN with a Buy rating and raised the price forecast from $248 to $265. Post raised its second-quarter estimates for the company, citing stronger-than-expected U.S. retail data, favorable foreign exchange (FX) movements, and rising AI-related demand via Anthropic. The analyst forecasted second-quarter revenue of $164 billion, exceeding Wall Street's consensus of $162 billion. Also Read: Amazon's AI-Powered Cost Cuts, Labor Gains And Record Prime Day Drive Analyst's Bullish Outlook He expects Amazon Web Services (AWS) to grow 16.5% year-over-year, slightly below the first-quarter's 16.9% but in line with Street projections of 17%. However, Post noted that robust AI demand and accelerating AWS infrastructure investments will drive growth reacceleration in the second half of the year. The analyst projects $17.8 billion in second-quarter profit, above the consensus estimate of $17.0 billion and the high end of Amazon's own guidance of $17.5 billion. Key drivers include resilient consumer spending, signs of acceleration in e-commerce trends, and FX benefits, especially with the euro up 5% year-over-year (Y/Y) and 8% quarter-over-quarter (Q/Q) against the dollar, potentially delivering a 130bps FX tailwind vs. the Street's modest 30bps estimate, he noted. In North America Retail, aggregated BAC credit/debit card data and Bloomberg Second Measure point to a 4-point acceleration in sales growth versus the first quarter, Post noted. The analyst said this sets the stage for Amazon to beat Street expectations by over 2% in the region. International Retail could benefit from FX trends, as the Street models only offer a modest boost. Amazon's guidance for the third quarter is expected to range between $169 billion and $174 billion (vs. Street at $172.8 billion) with GAAP EBIT projected between $14.0 billion and $18.0 billion (Street at $19.4 billion), Post noted. He suggested Amazon's historical conservatism could result in cautious guidance, but if second-quarter results show substantial upside, the third-quarter outlook could surprise higher. Trending Investment OpportunitiesAdvertisementArrivedBuy shares of homes and vacation rentals for as little as $100. Get StartedWiserAdvisorGet matched with a trusted, local financial advisor for free.Get StartedPoint.comTap into your home's equity to consolidate debt or fund a renovation.Get StartedRobinhoodMove your 401k to Robinhood and get a 3% match on deposits.Get Started Post also highlighted reports of AWS job cuts, which may support margin expansion in the second half. The analyst estimates second-quarter AWS operating margins at 36.0%, slightly above the consensus of 35.3%, though down 3.5 points from the first quarter due to higher stock-based compensation. He further noted that AWS capex spending is scaling rapidly, up 38 points Y/Y, now accounting for 70% of Amazon's capex, signaling a ramp in infrastructure buildout that should alleviate previous supply constraints and support future growth. Post said positives that could boost investor confidence included solid second-quarter retail performance from resilient consumer demand, potential third-quarter boost from a longer Prime Day, retail margin leverage from hiring freezes and cost discipline, AWS revenue acceleration tied to increasing AI and chip demand and improved operating efficiency and tax savings from the Big Beautiful Bill, which could add $6.4 billion in incremental cash tax benefits between 2025-2027. Despite trading at 13.4 times 2026 EV/EBITDA, Amazon remains below its 10-year average of 16.5 times, the analyst said, suggesting potential for multiple expansion if growth momentum holds. Upcoming results from Alphabet GOOGL and Microsoft MSFT may also influence sentiment ahead of Amazon's report, Post noted. Post projected second-quarter revenue of $163.92 billion and EPS of $1.40. Price Action: AMZN stock is trading higher by 0.26% to $228.05 at last check Wednesday. Read Next: How Taiwan Is Betting Big On AI To Power Its Economy Photo via Shutterstock AMZNAmazon.com Inc$228.380.40%Stock Score Locked: Edge Members Only Benzinga Rankings give you vital metrics on any stock - anytime. Unlock RankingsEdge RankingsMomentum66.66Growth97.19Quality67.87Value49.80Price TrendShortMediumLongOverviewGOOGLAlphabet Inc$190.44-0.47%MSFTMicrosoft Corp$505.13-0.03%Market News and Data brought to you by Benzinga APIs

Should You Buy Amazon Stock Before July 31? | The Motley Fool

A new quarterly earnings season is officially underway in corporate America. Hundreds of companies will release their results for the second quarter of 2025 (ended June 30) over the next few weeks, but Wall Street will be particularly focused on the multitrillion-dollar tech giants that are fueling the artificial intelligence (AI) boom. Amazon (AMZN -0.67%) is scheduled to release its second-quarter results on July 31. Although e-commerce remains the company's largest source of revenue, analysts will be keying in on the Amazon Web Services (AWS) cloud computing platform, which is home to many of the tech giant's most valuable AI projects. Should investors buy Amazon stock ahead of the July 31 report? AWS is the world's largest cloud computing platform. It offers hundreds of services designed to help businesses operate in the digital sphere, whether they need simple website hosting or complex software development tools. But AWS is now looking to dominate the AI industry's three core layers: hardware (data centers and chips), large language models (LLMs), and software. AWS is frantically building new data centers and fitting them with thousands of graphics processing units (GPUs) from leading chipmakers like Nvidia. Amazon also developed its own chips, like Trainium2, which can reduce the cost of AI training workloads by as much as 40% compared to competing hardware. AWS also offers a growing selection of ready-made LLMs through its Bedrock platform. It includes the Nova family of models which Amazon designed in-house, and models from prominent third parties like Anthropic and Meta Platforms. Data center infrastructure and LLMs are the two main ingredients required to create AI software, so offering different chip configurations and a diverse portfolio of models makes AWS a very attractive destination for developers. AWS generated a record $29.3 billion in revenue during the first quarter of 2025 (ended March 31), which was a 17% increase from the year-ago period. That growth rate decelerated from the previous quarter three months earlier, which suggests the cloud segment is losing a little bit of momentum. However, AWS has more demand for AI data center capacity than it can supply right now, which is hurting the platform's ability to grow. Back in May, Amazon CEO Andy Jassy told investors those constraints were expected to ease within months, so it's possible AWS will report a reacceleration in its revenue growth on July 31. Amazon generated a whopping $638 billion in total revenue across all of its businesses last year, and Wall Street's consensus estimate (provided by Yahoo! Finance) suggests it will deliver close to $700 billion in 2025. Over the last couple of years, the company focused on squeezing as much profit as possible out of its top line by focusing on efficiency. AWS is the profitability engine behind Amazon's entire organization. It was responsible for 62% of the company's total operating income in the first quarter of 2025, despite accounting for just 19% of its revenue. E-commerce, on the other hand, is still Amazon's largest business by revenue, but it operates on razor-thin profit margins because its goal is to offer customers ultra-low prices. Therefore, management focused on cutting costs and boosting efficiency in this segment rather than charging its customers more. In 2023, Amazon split its U.S. logistics network into eight regions, and the products it stores in each fulfillment center are now specific to each geographic area. This means popular goods travel shorter distances to reach customers, resulting in lower costs and faster delivery times. The company is also investing in AI tools in its fulfillment centers to save money -- like Project Private Investigator, which uses AI and computer vision to weed out defective products before they are shipped. This reduces the frequency of refunds and returns. The incredible growth of AWS, and the e-commerce segment's higher efficiency, combined to drive a surge in Amazon's earnings over the last couple of years. It generated $5.53 in earnings per share (EPS) during 2024, which was a whopping 90% increase from the year-ago period. The company beat Wall Street's consensus estimates in all four quarters throughout the year, by an average of 23%. Then, Amazon delivered $1.59 in EPS during the first quarter of 2025, which was up 62% year over year. It was also far above the Street's estimate of $1.36. Analysts think the company generated around $1.31 in EPS during the second quarter, but don't be surprised if it delivers another huge beat. One quarterly report is unlikely to change Amazon's long-term trajectory. But its stock isn't cheap right now, so whether or not investors should buy it ahead of July 31 probably depends on their time horizon. The stock is trading at a price-to-earnings (P/E) ratio of 36.8, so it's notably more expensive than the Nasdaq-100 index average P/E ratio of 32.5. Therefore, investors who are looking for short-term gains over the next few months or so might be left disappointed. However, valuing Amazon stock based on its future potential earnings paints a different picture. Wall Street's consensus estimate suggests the company will deliver $7.29 in EPS in 2026, placing the stock at a forward P/E ratio of around 31. That suggests there is room for upside over the next 18 months, especially if we factor in Amazon's track record when it comes to beating analysts' estimates. Investors who want to maximize their potential returns should aim to hold Amazon stock for a longer period of five years or more, because it will give the company sufficient time to create value from its efforts in areas like AI. Investors in that camp are likely to do just fine if they buy the stock ahead of July 31, despite its presently elevated valuation.