Amazon (AMZN) delivered a robust earnings efficiency within the first quarter of 2025, a sign to buyers that the e-commerce large stays a dominant pressure in Huge Tech. However beneath the wholesome revenue lies a extra sophisticated image for buyers transferring ahead.
1 / 4 of stable outcomes for Amazon
Amazon posted $155.7 billion in income for the quarter ending March 31, up 9 p.c 12 months over 12 months. Nonetheless, that progress lagged another Magnificent 7 firms, like Microsoft (MSFT) and Meta (META), which expanded income by 13 p.c and 16 p.c, respectively. Amazon did outpace Apple’s (AAPL) sluggish 4 p.c progress.
The true headline, although, was Amazon’s backside line: Web earnings soared about 64 p.c to $17.1 billion. The surge was pushed largely by Amazon Net Providers (AWS), which as soon as once more demonstrated why it’s the corporate’s crown jewel.
AWS generated $29.3 billion in income and $11.5 billion in working earnings — almost 63 p.c of Amazon’s complete working revenue, though it made up lower than one-fifth of complete gross sales.
Promoting was one other vibrant spot, rising 19 p.c 12 months over 12 months. Analysts are optimistic about this phase of the corporate transferring ahead.
Nonetheless, Wall Road wasn’t completely satisfied. Shares of Amazon dipped about 2.5 p.c in after-hours buying and selling, reflecting concern about Amazon’s smooth Q2 steering and a still-murky tariff outlook.
The tariff story: Extra bark than chunk — for now
The onset of recent U.S. tariffs on China loomed over tech earnings season. For Amazon, the impression thus far seems restricted.
Through the firm’s earnings name, CEO Andy Jassy downplayed the risk: “Amazon shouldn’t be uniquely inclined to tariffs,” noting that almost all sellers hadn’t raised costs — but.
Amazon noticed elevated purchases in sure classes over the quarter, which may be the results of shoppers stockpiling forward of potential value hikes.
“Shopper shopping for habits hasn’t actually modified within the face of tariffs, even via April,” Morningstar analyst Dan Romanoff famous in a analysis be aware. “We see some pre-buying habits forward of tariffs, which is price monitoring if the tariff scenario persists past the second quarter.”
Whereas costs have held comparatively regular, the corporate isn’t ruling out future changes if tariffs hit more durable in Q2 and past.
Different tech firms had been combined on their messaging round tariffs this week. Apple, which is uncovered to direct imports from China, famous a potential $900 million headwind in its steering. Meta noticed some softening in advert spend from retailers in Asia, whereas Microsoft notably had little to say about tariffs, solely mentioning how uncertainty contributed to excessive ranges of stock.
Nonetheless, buyers aren’t taking the tariff story frivolously. April wasn’t included in Q1 outcomes however the month was a curler coaster for Wall Road. Tariff drama and combined financial indicators triggered sharp swings in each the Dow Jones Industrial Common and the S&P 500. A late-month rally helped trim some earlier losses, however buyers remained skittish coming into Could as geopolitical threat and financial uncertainty proceed clouding the horizon.
AWS continues to be cashing in, however Microsoft is catching up
AWS continues to be Amazon’s massive revenue engine. Its 39.5 p.c margin is the very best it’s been in over a decade, outpacing anything within the firm’s portfolio and dwarfing its low-margin retail enterprise. However AWS’ 17 p.c progress price was its slowest in 5 quarters and missed some analyst targets.
In the meantime, rivals like Microsoft aren’t taking their foot off the fuel, elevating questions on Amazon’s long-term outlook.
Microsoft’s Azure cloud platform grew 33 p.c — double AWS’ 17 p.c price. A full 16 proportion factors of that progress got here from AI companies, a fast-expanding space the place Amazon dangers falling behind.
Azure’s AI progress is an early indicator that Microsoft could also be higher positioned to steer within the subsequent wave of spending, particularly in generative AI.
However Amazon is racing to catch up. Jassy stated AWS’ generative AI revenues are rising at triple-digit charges as the corporate continues to signal main AWS contracts with firms equivalent to Adobe, Uber and Cisco.
Nonetheless, capability constraints — pushed by surging demand for AI infrastructure — are already limiting how a lot income AWS can seize within the quick time period.
The cloud arms race is coming into a brand new part the place computing energy and power capability are as vital as developer instruments. AWS’ spending is anticipated to rise sharply this 12 months to be able to hold tempo with infrastructure wants. That might weigh on firm margins — even because it positions Amazon to change into a long-term AI powerhouse.
Nonetheless, some analysts stay optimistic.
“Whereas there may very well be some gentle disappointment round stable AWS outcomes given Azure’s very robust outcomes on April 30, we be aware AWS faces the identical capability constraints (as Azure) and nonetheless produced upside to our estimate within the first quarter,” wrote Romanoff within the analysis be aware. “Synthetic intelligence workloads are rising in extra of 100% 12 months over 12 months on AWS.”
Trying forward: What’s subsequent for Amazon?
Amazon famous “substantial uncertainty” for the subsequent quarter, noting elements equivalent to
tariff insurance policies and buyer demand — together with the impression of recessionary fears — as massive unknowns.
Amazon’s forecast for Q2 working earnings — between $13 billion and $17.5 billion — was under consensus expectations of $17.7 billion. That steering might have spooked some buyers.
Amazon is well-positioned from a elementary standpoint. It enjoys robust gross sales each in North America and internationally. Its advert enterprise is rising quick, and AWS stays a robust revenue driver.
However that doesn’t imply Amazon is within the clear. It nonetheless faces a number of headwinds, together with:
- An AI arms race dominated by Microsoft.
- An costly enlargement of knowledge heart capability.
- Unresolved labor tensions.
- And the wildcard: Tariffs that might nonetheless set off value hikes or shopper pullbacks.
Backside line
Based mostly on its most up-to-date earnings report, Amazon demonstrated it may nonetheless ship market-beating earnings — even in a slowing macro surroundings and amid looming tariff coverage shifts. However with weaker steering for Q2 and extra spending on AI, buyers are nonetheless a bit uneasy. Amazon stays a powerhouse — however it’s navigating more and more tough waters.
Editorial Disclaimer: All buyers are suggested to conduct their very own impartial analysis into funding methods earlier than investing resolution. As well as, buyers are suggested that previous funding product efficiency is not any assure of future value appreciation.
