Amazon Earnings Updates: Stock Falls Despite Q2 Income, Revenue Beats

Amazon’s stock is down 7.4% in after-hours trading as the company’s earnings call ends.

CEO Andy Jassy got two analyst questions on AI: One about whether AWS is falling behind, followed by another about how quickly Amazon will get its AI products to market.

He gave long answers to both, though neither included many specifics about how AWS is responding to competitors.

CEO Andy Jassy said he considers there to be two players in “modern technology” satellite-based broadband internet, including “the incumbent in the market” — presumably Starlink — and Amazon, which is trying to develop its own competitor in Project Kuiper.

He said price is one area where Amazon can distinguish itself.

Amazon also has existing relationships with various clients, including governments, many of whom want Amazon’s AI capabilities.

He said that Kuiper has had some delays, but the service should be in a commercial beta later this year or early next year.

Alexa+, Amazon’s AI-enabled voice assistant, could include advertising or subscriptions eventually, CEO Andy Jassy said in response to an analyst question.

Jassy said that Alexa+ can act on behalf of users, such as playing music or turning on lights, in a way that most other chatbots on the market can’t.

CEO Andy Jassy says the biggest challenge that AWS faces as it tries to add AI infrastructure is electricity, but adds that procuring chips can also be a problem.

Those issues could take “several quarters” to resolve, Jassy said.

The call’s first analyst question is about how Amazon is dealing with tariffs. Jassy says that he’s “unsure at this point who’s going to end up absorbing the higher costs” from tariffs.

The CEO reiterated that Amazon hasn’t seen much effect from tariffs in the first half of 2025, but added that that could change in the second half of the year.

CEO Andy Jassy repeated something he’s said in the past about AWS: Most IT spending still happens on-premise and not on cloud services like those Amazon provides. But, he thinks that will “flip” as more companies sign up with AWS, including for AI uses.

Jassy called out some new uses of AI at Amazon, such as AgentCore, which he says makes it easier to develop custom AI agents. People want to build agents, but “they lack the tools to build them,” Jassy said.

While it didn’t happen during the second quarter, this year’s Prime Day led more customers to sign up for Prime as well as record sales, Jassy said.

It was Amazon’s biggest-ever, the CEO said. The annual sales event lasted four days this year, double the length in 2024.

CEO Andy Jassy said as the call kicked off that Amazon hadn’t seen “diminishing demand” through the first half of the year or “meaningfully appreciating” prices due to tariffs.

He also highlighted Amazon’s 2 million sellers, a network that he mentioned last quarter when asked about tariffs. That range of sellers means that customers have lots of choices if they want to look for low prices, Jassy said at the time.

Amazon’s call has started. CEO Andy Jassy, CFO Brian Olsavsky, and head of investor relations Dave Fildes are on the call. Analysts are listening for their remarks on AWS’s growth, Amazon’s AI investments, and how the company is navigating tariffs.

Amazon Web Services, the epicenter of the company’s AI investments, continued to deliver growth during the second quarter. AWS sales rose 17% to $30.87 billion, narrowly beating Bloomberg’s analyst consensus.

New AWS offerings during the quarter included AI agents for software developers and additional foundation models in Bedrock, including one from Anthropic. AWS also signed new deals with over a dozen companies, from PepsiCo to Airbnb.

CEO Andy Jassy used Amazon’s earnings release to highlight some of the company’s new uses of AI during the quarter.

Among its latest features are a generative AI tool that reads product summaries and reviews to customers as audio clips and an option for sellers to use AI to improve product listings.

Amazon has also rolled out Alexa+ to millions of users, Jassy said.

“Our conviction that AI will change every customer experience is starting to play out,” he said in the press release.

Second quarter

• Net sales: $167.7 billion, +13% y/y, estimate $162.15 billion
• EPS $1.68 vs. $1.26 y/y, estimate $1.33
• Online stores net sales: $61.49 billion, +11% y/y, estimate $59.13 billion
• Physical stores net sales: $5.60 billion, +7% y/y, estimate $5.49 billion
• Third-Party Seller Services net sales: $40.35 billion, +11% y/y, estimate $38.97 billion
• Subscription Services net sales: $12.21 billion, +12% y/y, estimate $11.92 billion
• AWS net sales: $ 30.87 billion, +17% y/y, estimate $30.77 billion
• North America net sales: $100.07 billion, +11% y/y, estimate $97.36 billion
• International net sales: $36.76 billion, +16% y/y, estimate $34.21 billion
• Third-party seller services net sales excluding F/X: 10% vs. 13% y/y, estimate +7.49%
• Subscription services net sales excluding F/X: 11% vs. 11% y/y, estimate 9.68%
• Amazon Web Services net sales excluding F/X: 17% vs. 19% y/y, estimate +17%
• Operating income: $19.17 billion, +31% y/y, estimate $16.97 billion
• Operating margin: 11.4% vs. 9.9% y/y, estimate 10.4%
• North America operating margin: 7.5% vs. 5.6% y/y, estimate +5.78%
• International operating margin: 4.1% vs. 0.9% y/y, estimate 1.87%
• Fulfillment expense: $25.98 billion, estimate $25.74 billion
• Seller unit mix: 62% vs. 61% y/y, estimate 61.5%

Third quarter

• Net sales: $174 billion to $179.5 billion, estimate $173.25 billion
• Operating income: $15.5 billion and $20.5 billion, estimate $19.41 billion

Source: Bloomberg data and company filings

Early data suggests that Amazon’s advertising business could be a highlight in its Q2 results. That was the case during Amazon’s first quarter, when ads were a significant contributor to the company’s profit.

A Q2 survey of advertising agencies from analysts at Wedbush found that 89% of respondents increased their ad spending with Amazon over the same period in 2024.

Marketplace advertising platform Pacvue found that average daily spending on ads for sponsored brand campaigns rose 4.2% during the quarter. There were also bright spots in the third quarter, with Amazon’s four-day Prime Day event pushing up ad sales over last year, Pacvue found.

In other areas, such as streaming ads, Amazon’s advertising vertical faces more competition, BI has reported.

Amazon expects capital expenditures of roughly $105 billion in 2025, CFO Brian Olsavsky said in February. Much of that will help build Amazon’s AI products and tools.

The tech company has spent the last quarter expanding its AI offerings, including developing a suite of business tools. Jassy and others at Amazon have said that returns on the company’s big AI investments won’t come all at once, though.

Regardless, analysts will want to hear the latest on Amazon Web Services‘ AI exploits on Thursday’s call.

“AWS is the future growth engine, and all eyes will be on how revenue performance is faring alongside the rising capital expenditures for AI infrastructure and the impact on margins,” Sky Canaves, principal analyst at EMARKETER, wrote ahead of Thursday’s earnings report. EMARKETER is owned by Business Insider’s parent company, Axel Springer.

Amazon’s rivals continue to spend on AI. Microsoft’s capital expenditures, which include its spending on AI infrastructure, are expected to total $30 billion for the first quarter, the company said Wednesday. That’s more than analysts were expecting.

Justin Post, research analyst at Bank of America, believes Amazon’s high-margin cloud computing business will be the key value driver going forward.

Post will be looking for signs of AWS capacity increases that will lead to further AWS revenue growth in the second half of the year. Last quarter, Amazon said AWS growth was held back by chip shortages and energy constraints at its data centers.

Post also expects Amazon’s partnership with Anthropic to contribute significantly to the AWS business as the AI startup runs its training models on Amazon’s infrastructure.

BofA recently raised its price target from $248 to $265, which implies 14% upside from current levels.

Amazon’s Prime Day sales event took place in July after the second quarter ended, so the company might not go into details about the event’s financial performance.

This year’s sale lasted four days, making it Amazon’s longest-ever version of the event. That, plus consumers’ focus on deals as they continue to worry about tariffs, could get Jassy and others to talk a bit about how Prime Day went this year.

Brent Thill, senior technology research analyst at Jefferies, said that tariff impacts and price increases have largely not materialized. Consumer demand has remained resilient, and inventory levels are stable going into the second half of the year.

“Tariffs appear overstated for now, and Amazon remains the go-to destination for online deals and continues to draw strong consumer and brand engagement,” Thill wrote in a recent note.

Thill sees AWS emerging as the preferred platform for complex AI workloads, meaning that enterprise customers are increasingly turning to Amazon as they look to integrate AI into their business model.

Jefferies maintains its “Buy” rating and has a price target of $265 for the stock, implying upside of about 14%.

Amazon’s latest plans to deal with tariffs, and potentially raise prices, as so many other companies have done, are likely to be a key theme on the earnings call.

Some Amazon customers loaded up earlier this year on items that could get hit with President Donald Trump’s tariffs, CEO Andy Jassy said in May. He said Amazon’s product selection and ability to source from sellers in China give it an edge over other retailers, especially when it comes to offering low prices.

Jassy also said then that it wasn’t clear exactly what effect tariffs would have on the prices of products sold on Amazon. The company’s guidance for the second quarter was below what analysts were hoping for, in part because Amazon was waiting to see what would happen with tariffs.

Three months later, on the eve of another trade negotiation deadline, investors will be listening for an update.

Amazon is shaping up to be one of the most undervalued Magnificent Seven companies, UBS analyst Stephen Ju said.

The stock’s valuation was deeply revised downwards at the height of tariff volatility earlier this year, but it’s poised for a comeback as trade deals solidify.

“We believe Amazon to be ‘most-coiled’ among our coverage given the more extensive investments across e-commerce, AWS, content/advertising, and Kuiper,” Ju wrote.

UBS expects AI spending to continue rising. Ju is raising his 2025 capex forecast for Amazon from $107 billion to $112 billion, citing improving cloud infrastructure sentiment.

The bank reiterated its “Buy” rating and raised its price target from $249 to $271, implying about 18% upside.

Second quarter

• Net sales estimate $162.15 billion
• EPS estimate $1.33
• Online stores net sales estimate $59.13 billion
• Physical stores net sales estimate $5.49 billion
• Third-Party Seller Services net sales estimate $38.97 billion
• Subscription Services net sales estimate $11.92 billion
• AWS net sales estimate $30.77 billion
• North America net sales estimate $97.36 billion
• International net sales estimate $34.21 billion
• Third-party seller services net sales excluding F/X estimate
  +7.49%
• Subscription services net sales excluding F/X estimate +9.68%
• Amazon Web Services net sales excluding F/X estimate +17%
• Operating income estimate $16.97 billion
• Operating margin estimate 10.4%
• North America operating margin estimate +5.78%
• International operating margin estimate 1.87%
• Fulfillment expense estimate $25.74 billion
• Seller unit mix estimate 61.5%

Third quarter

• Net sales estimate $173.25 billion
• Operating income estimate $19.41 billion
• Capital expenditure estimate $26.44 billion

  Full year

• Capital expenditure estimate $104.42 billion