Amazon (AMZN) delivered a powerful earnings efficiency within the first quarter of 2025, a sign to traders that the e-commerce large stays a dominant power in Large Tech. However beneath the wholesome revenue lies a extra sophisticated image for traders shifting ahead.
1 / 4 of strong 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: Internet 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 whole working revenue, despite the fact that it made up lower than one-fifth of whole gross sales.
Promoting was one other vivid spot, rising 19 p.c 12 months over 12 months. Analysts are optimistic about this phase of the corporate shifting ahead.
Nevertheless, Wall Avenue wasn’t completely satisfied. Shares of Amazon dipped about 2.5 p.c in after-hours buying and selling, reflecting concern about Amazon’s gentle Q2 steerage and a still-murky tariff outlook.
The tariff story: Extra bark than chew — for now
The onset of latest U.S. tariffs on China loomed over tech earnings season. For Amazon, the influence to this point seems restricted.
Through the firm’s earnings name, CEO Andy Jassy downplayed the menace: “Amazon just isn’t uniquely prone 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 worth hikes.
“Client shopping for conduct hasn’t actually modified within the face of tariffs, even via April,” Morningstar analyst Dan Romanoff famous in a analysis word. “We see some pre-buying conduct forward of tariffs, which is value 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 tougher in Q2 and past.
Different tech firms have been combined on their messaging round tariffs this week. Apple, which is uncovered to direct imports from China, famous a attainable $900 million headwind in its steerage. 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, traders aren’t taking the tariff story frivolously. April wasn’t included in Q1 outcomes however the month was a curler coaster for Wall Avenue. 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 traders 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 huge 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 charge was its slowest in 5 quarters and missed some analyst targets.
In the meantime, opponents like Microsoft aren’t taking their foot off the gasoline, elevating questions on Amazon’s long-term outlook.
Microsoft’s Azure cloud platform grew 33 p.c — double AWS’ 17 p.c charge. A full 16 proportion factors of that progress got here from AI providers, 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 mentioned AWS’ generative AI revenues are rising at triple-digit charges as the corporate continues to signal main AWS contracts with firms comparable 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 section the place computing energy and vitality capability are as vital as developer instruments. AWS’ spending is anticipated to rise sharply this 12 months in an effort to maintain tempo with infrastructure wants. That would weigh on firm margins — even because it positions Amazon to turn out to be a long-term AI powerhouse.
Nonetheless, some analysts stay optimistic.
“Whereas there could possibly be some delicate disappointment round strong AWS outcomes given Azure’s very sturdy outcomes on April 30, we word AWS faces the identical capability constraints (as Azure) and nonetheless produced upside to our estimate within the first quarter,” wrote Romanoff within the analysis word. “Synthetic intelligence workloads are rising in extra of one hundred pc 12 months over 12 months on AWS.”
Wanting forward: What’s subsequent for Amazon?
Amazon famous “substantial uncertainty” for the subsequent quarter, noting components comparable to
tariff insurance policies and buyer demand — together with the influence of recessionary fears — as huge unknowns.
Amazon’s forecast for Q2 working earnings — between $13 billion and $17.5 billion — was under consensus expectations of $17.7 billion. That steerage could have spooked some traders.
Amazon is well-positioned from a basic standpoint. It enjoys sturdy gross sales each in North America and internationally. Its advert enterprise is rising quick, and AWS stays a powerful 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 information middle capability.
- Unresolved labor tensions.
- And the wildcard: Tariffs that would nonetheless set off worth hikes or shopper pullbacks.
Backside line
Based mostly on its most up-to-date earnings report, Amazon demonstrated it might probably nonetheless ship market-beating earnings — even in a slowing macro surroundings and amid looming tariff coverage shifts. However with weaker steerage for Q2 and extra spending on AI, traders are nonetheless a bit uneasy. Amazon stays a powerhouse — however it’s navigating more and more tough waters.
Editorial Disclaimer: All traders are suggested to conduct their very own unbiased analysis into funding methods earlier than investing choice. As well as, traders are suggested that previous funding product efficiency isn’t any assure of future worth appreciation.
