Key Points:
- Amazon beat earnings expectations with strong overall sales and profits in Q2 2025.
- AWS growth slowed compared to rivals, triggering investor concerns and a stock drop.
- Amazon ramped up AI investments, committing $100 billion to infrastructure and innovation.
Amazon posted better-than-expected earnings for the second quarter of 2025, with total net sales reaching $167.7 billion, marking a 13% year-over-year increase. The company’s net income jumped to $18.16 billion, or $1.68 per share, comfortably exceeding analyst expectations of $1.33 per share, according to Amazon’s investor release.
Amazon Web Services, the company’s high-margin cloud computing arm, reported revenue of $30.9 billion, reflecting a 17% year-over-year growth—slightly ahead of estimates. Operating income for AWS rose to $10.2 billion, contributing more than half of the company’s total operating profit of $19.2 billion.
CEO Andy Jassy emphasized Amazon’s Q2 ongoing investments in artificial intelligence across its platforms, citing the development of AI agents like Kiro and Strands, the expansion of Bedrock AgentCore, and enhanced integration of AI in Alexa+. He also noted operational improvements backed by over a million robots and AI‑powered internal tools.
Cloud Momentum Worries Investors Despite Strong Quarter
Despite a solid earnings beat, Amazon’s Q2 stock fell as much as 7% in after-hours trading. The pullback was largely driven by concerns over AWS’s slowing growth relative to rivals, including Microsoft Azure and Google Cloud, which posted growth rates of 39% and 32%, respectively. Analysts at Jefferies called AWS’s performance “underwhelming” in the context of the broader AI and cloud boom.
Additionally, investors were rattled by Amazon’s broad Q3 operating income guidance, which ranges from $15.5 billion to $20.5 billion, with a midpoint below consensus estimates. While Q3 revenue is projected between $174 billion and $179.5 billion, slightly above expectations, the muted profit outlook raised red flags about future margins.
AWS’s operating margin also slipped to 32.9%, its lowest level since late 2023, amid rising capital expenditures—up to $31.4 billion for the quarter. While AWS continues to be Amazon’s most profitable segment, accounting for approximately 60% of total operating profits, its decelerating growth trajectory is raising questions about how long it can maintain its competitive edge.
AI Ambitions and Tariff Strategy in Focus
Amid concerns over profitability, Amazon doubled down on its AI‑driven future, reaffirming a $100 billion commitment to AI infrastructure. This includes major data center expansions in Pennsylvania and Indiana, partnerships with AI firms like Anthropic, and a licensing deal with The New York Times for training large language models.
In terms of broader business strategy, Amazon addressed the threat of tariffs, stating that it had seen no meaningful dip in demand or price increases so far. Executives pointed to early inventory builds and global supply chain flexibility as reasons why tariffs haven’t yet materially impacted performance.
The company also spotlighted future-facing projects like Project Kuiper, its satellite broadband initiative aiming to rival SpaceX’s Starlink, which is expected to begin commercial testing in early 2026.
Amazon’s Q2 2025 earnings underscored its resilience and strength in retail and cloud computing, bolstered by aggressive AI innovation. However, slowing AWS growth, cautious profit guidance, and investor sensitivity to competitive headwinds triggered a stock sell-off. As Amazon pushes deeper into AI, infrastructure, and connectivity, Wall Street will be watching how effectively it converts massive investments into sustainable long-term growth.
