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Amazon delivered Q2 earnings beat of 26.32% but stock fell over 7% on weaker Q3 guidance.
AWS growth of 18% lags behind Microsoft Azure's 39% and Google Cloud's 32% expansion rates.
AMZN plans $100+ billion AI infrastructure investment, pressuring AWS margins to 35% from 39.5%.
Amazon.com (AMZN - Free Report) delivered second-quarter 2025 earnings of $1.68 per share, which increased 36.6% from the year-ago quarter and beat the Zacks Consensus Estimate by 26.32%.
AMZN’s net income increased 34.8% year over year to $18.2 billion in the second quarter. Net sales of $167.7 billion rose 13% year over year, ahead of management’s guidance of $159-$164 billion and beat the Zacks Consensus Estimate by 3.32%.
Excluding the $1.5 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 12% compared with the second quarter of 2024.
Top-line growth was driven by solid momentum across the North America and International segments alongside steady growth in the Amazon Web Services (“AWS”) segment.
Amazon’s strong global presence, growing Prime momentum and increasing efforts toward gaining strong traction among small and medium businesses are likely to drive its financial performance in the days ahead. However, geopolitical tensions, foreign exchange headwinds, inflation, interest rates and regional labor market constraints are concerning.
Top-Line Details of AMZN
Product sales (40.7% of sales) increased 10.8% year over year to $68.2 billion. Service sales (59.3% of sales) jumped 15.1% from the year-ago quarter to $99.4 billion.
By segment, North America revenues (59.7% of sales) rose 11.1% from the year-ago quarter to $100 billion, which beat the Zacks Consensus Estimate by 2.3%. International revenues (21.9% of sales) gained 16.1% year over year to $36.7 billion, which beat the consensus mark by 8.55%.
AWS revenues (18.4% of sales) rose 17.5% year over year to $30.8 billion, which beat the consensus mark by 0.71%.
Strengthening relationships with third-party sellers remained another positive. In the reported quarter, sales generated by third-party seller services rose 11% on a year-over-year basis to $40.3 billion, which beat the Zacks Consensus Estimate by 3.64%.
Sales from robust advertising services increased 23% year over year to $15.6 billion, which beat the consensus mark by 5.3%. AMZN experienced 8% year-over-year growth in its physical store sales, which were $5.59 billion in the reported quarter, up 7% year over year. The figure beat the consensus mark by 2.05%.
The company’s online store sales were $61.4 billion, up 11% year over year. The figure beat the Zacks Consensus Estimate by 4.63%.
Amazon's Prime services demonstrated robust momentum in second-quarter 2025, with subscription services revenues reaching $12.2 billion, representing 12% year-over-year growth from the prior year's $10.8 billion. The figure beat the consensus mark by 2.48%. This performance underscores the continued strength of Prime's value proposition amid competitive pressures and economic uncertainties.
The service's competitive positioning remained strong, with Prime Video maintaining market leadership dynamics and enhanced content offerings driving engagement. Infrastructure investments in delivery capabilities and digital services continued to support member satisfaction and retention. While Prime Day 2025 occurred after the quarter ended (July 8-11), management indicated it was the biggest Prime Day event ever, suggesting continued consumer enthusiasm.
This Zacks Rank #2 (Buy) company’s strategic focus on high-margin services like advertising and subscription offerings positions Prime services well for sustained growth, despite broader retail sector challenges and increased capital expenditure requirements for AI infrastructure development. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Amazon Strengthens AWS and AI Innovations in Q2
Amazon Web Services revenues climbed 18% in the second quarter, though this growth rate trails Microsoft (MSFT - Free Report) Azure's 39% and Alphabet (GOOGL - Free Report) -owned Google Cloud's 32% expansion in the same period. Despite maintaining market leadership, AWS faces intensifying competitive pressure as rivals demonstrate superior growth velocity. The cloud division generated $10.2 billion in operating income, indicating margin compression amid heavy infrastructure investments.
The quarter marked a pivotal moment for Amazon's AI initiatives, with the company systematically embedding AI across its entire ecosystem. Key innovations included the launch of Kiro, an agentic IDE for developers, Bedrock AgentCore for secure AI operations, and S3 Vectors for cost-efficient AI storage. These tools represent Amazon's strategy to democratize AI capabilities while creating competitive moats through integrated solutions. The company's AI-driven logistics optimizations, including DeepFleet managing over a million robots, are driving operational efficiencies and supporting expansion of same-day delivery to more than 4,000 U.S. cities.
Amazon's partnership strategy gained significant momentum during the quarter, with AWS securing new agreements with major enterprises, including PepsiCo (PEP - Free Report) , Airbnb, Peloton, Nasdaq, London Stock Exchange, Nissan Motor, GitLab, SAP, Warner Bros. Discovery, and NatWest. These partnerships demonstrate the breadth of AWS' enterprise penetration and its success in positioning itself as the preferred infrastructure provider for digital transformation initiatives.
However, the company faces near-term margin pressures from its ambitious AI investments. Amazon's $100+ billion capital expenditure plan for 2025, heavily focused on AI infrastructure, is expected to temporarily reduce AWS’ operating margins to 35% from the previous 39.5%. Despite these headwinds, Amazon's advertising business provided a bright spot with 23% growth to $15.69 billion, reflecting successful AI-powered optimization of its advertising platform and growing market share in digital advertising.
Operating Details
Operating expenses were $148.5 billion, up 11.4% from the year-ago quarter. As a percentage of revenues, the figure contracted 150 basis points (bps) on a year-over-year basis to 88.6%.
The cost of sales, fulfillment and technology and infrastructure expenses increased 9.5%, 10.2% and 21.8% year over year to $80.8 billion, $25.9 billion and $27.1 billion, respectively.
Sales and marketing and other operating expenses were $11.4 billion and $199 million, up 8.6% and 105% year over year, respectively. General and administrative expenses declined 2.5% to $2.96 billion.
Operating income increased 30.7% year over year to $19.1 billion in the first quarter. As a percentage of revenues, the figure expanded 150 basis points (bps) on a year-over-year basis to 11.4%.
North America segment operating income was $7.51 billion, up 48.4% from the year-ago quarter.
International segment operating income came in at $1.49 billion, up from $273 million reported in the year-ago quarter.
AWS segment operating income was $10.1 billion, up 8.8% from the year-ago quarter.
Balance Sheet & Cash Flow
As of June 30, 2025, cash and cash equivalents were $57.7 billion, down from $66.2 billion as of March 31, 2025.
Marketable securities totaled $35.4 billion as of June 30, 2025, up from $28.3 billion as of March 31, 2025.
The long-term debt was $52.6 billion at the end of the reported quarter, up from $53.3 billion at the end of the previous quarter.
Operating cash flow increased 12% to $121.1 billion for the trailing 12 months compared with $108 billion for the trailing 12 months ended June 30, 2024.
Free cash flow decreased to $18.2 billion for the trailing 12 months compared with $53 billion for the trailing 12 months ended June 30, 2024.
Guidance
Amazon stock dipped more than 7% in after-hours trading after projecting weaker-than-expected operating income for the third quarter and trailing the sales growth of its cloud rivals. Operating income is expected to be between $15.5 billion and $20.5 billion compared with $17.4 billion in the third quarter of 2024.
For third-quarter 2025, Amazon expects net sales between $174 billion and $179.5 billion, or to grow in the range of 10-13% compared with third-quarter 2024. This guidance anticipates an unfavorable impact of approximately 130 basis points from foreign exchange rates.
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Amazon Stock Falls Despite Q2 Earnings & Revenues Beat Estimates
Key Takeaways
Amazon.com (AMZN - Free Report) delivered second-quarter 2025 earnings of $1.68 per share, which increased 36.6% from the year-ago quarter and beat the Zacks Consensus Estimate by 26.32%.
AMZN’s net income increased 34.8% year over year to $18.2 billion in the second quarter. Net sales of $167.7 billion rose 13% year over year, ahead of management’s guidance of $159-$164 billion and beat the Zacks Consensus Estimate by 3.32%.
Excluding the $1.5 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 12% compared with the second quarter of 2024.
Top-line growth was driven by solid momentum across the North America and International segments alongside steady growth in the Amazon Web Services (“AWS”) segment.
Amazon’s strong global presence, growing Prime momentum and increasing efforts toward gaining strong traction among small and medium businesses are likely to drive its financial performance in the days ahead. However, geopolitical tensions, foreign exchange headwinds, inflation, interest rates and regional labor market constraints are concerning.
Top-Line Details of AMZN
Product sales (40.7% of sales) increased 10.8% year over year to $68.2 billion. Service sales (59.3% of sales) jumped 15.1% from the year-ago quarter to $99.4 billion.
By segment, North America revenues (59.7% of sales) rose 11.1% from the year-ago quarter to $100 billion, which beat the Zacks Consensus Estimate by 2.3%. International revenues (21.9% of sales) gained 16.1% year over year to $36.7 billion, which beat the consensus mark by 8.55%.
AWS revenues (18.4% of sales) rose 17.5% year over year to $30.8 billion, which beat the consensus mark by 0.71%.
Strengthening relationships with third-party sellers remained another positive. In the reported quarter, sales generated by third-party seller services rose 11% on a year-over-year basis to $40.3 billion, which beat the Zacks Consensus Estimate by 3.64%.
Sales from robust advertising services increased 23% year over year to $15.6 billion, which beat the consensus mark by 5.3%. AMZN experienced 8% year-over-year growth in its physical store sales, which were $5.59 billion in the reported quarter, up 7% year over year. The figure beat the consensus mark by 2.05%.
The company’s online store sales were $61.4 billion, up 11% year over year. The figure beat the Zacks Consensus Estimate by 4.63%.
Amazon.com, Inc. Price and EPS Surprise
Amazon.com, Inc. price-eps-surprise | Amazon.com, Inc. Quote
Amazon’s Retail and Consumer Business in Q2
Amazon's Prime services demonstrated robust momentum in second-quarter 2025, with subscription services revenues reaching $12.2 billion, representing 12% year-over-year growth from the prior year's $10.8 billion. The figure beat the consensus mark by 2.48%. This performance underscores the continued strength of Prime's value proposition amid competitive pressures and economic uncertainties.
The service's competitive positioning remained strong, with Prime Video maintaining market leadership dynamics and enhanced content offerings driving engagement. Infrastructure investments in delivery capabilities and digital services continued to support member satisfaction and retention. While Prime Day 2025 occurred after the quarter ended (July 8-11), management indicated it was the biggest Prime Day event ever, suggesting continued consumer enthusiasm.
This Zacks Rank #2 (Buy) company’s strategic focus on high-margin services like advertising and subscription offerings positions Prime services well for sustained growth, despite broader retail sector challenges and increased capital expenditure requirements for AI infrastructure development. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Amazon Strengthens AWS and AI Innovations in Q2
Amazon Web Services revenues climbed 18% in the second quarter, though this growth rate trails Microsoft (MSFT - Free Report) Azure's 39% and Alphabet (GOOGL - Free Report) -owned Google Cloud's 32% expansion in the same period. Despite maintaining market leadership, AWS faces intensifying competitive pressure as rivals demonstrate superior growth velocity. The cloud division generated $10.2 billion in operating income, indicating margin compression amid heavy infrastructure investments.
The quarter marked a pivotal moment for Amazon's AI initiatives, with the company systematically embedding AI across its entire ecosystem. Key innovations included the launch of Kiro, an agentic IDE for developers, Bedrock AgentCore for secure AI operations, and S3 Vectors for cost-efficient AI storage. These tools represent Amazon's strategy to democratize AI capabilities while creating competitive moats through integrated solutions. The company's AI-driven logistics optimizations, including DeepFleet managing over a million robots, are driving operational efficiencies and supporting expansion of same-day delivery to more than 4,000 U.S. cities.
Amazon's partnership strategy gained significant momentum during the quarter, with AWS securing new agreements with major enterprises, including PepsiCo (PEP - Free Report) , Airbnb, Peloton, Nasdaq, London Stock Exchange, Nissan Motor, GitLab, SAP, Warner Bros. Discovery, and NatWest. These partnerships demonstrate the breadth of AWS' enterprise penetration and its success in positioning itself as the preferred infrastructure provider for digital transformation initiatives.
However, the company faces near-term margin pressures from its ambitious AI investments. Amazon's $100+ billion capital expenditure plan for 2025, heavily focused on AI infrastructure, is expected to temporarily reduce AWS’ operating margins to 35% from the previous 39.5%. Despite these headwinds, Amazon's advertising business provided a bright spot with 23% growth to $15.69 billion, reflecting successful AI-powered optimization of its advertising platform and growing market share in digital advertising.
Operating Details
Operating expenses were $148.5 billion, up 11.4% from the year-ago quarter. As a percentage of revenues, the figure contracted 150 basis points (bps) on a year-over-year basis to 88.6%.
The cost of sales, fulfillment and technology and infrastructure expenses increased 9.5%, 10.2% and 21.8% year over year to $80.8 billion, $25.9 billion and $27.1 billion, respectively.
Sales and marketing and other operating expenses were $11.4 billion and $199 million, up 8.6% and 105% year over year, respectively. General and administrative expenses declined 2.5% to $2.96 billion.
Operating income increased 30.7% year over year to $19.1 billion in the first quarter. As a percentage of revenues, the figure expanded 150 basis points (bps) on a year-over-year basis to 11.4%.
North America segment operating income was $7.51 billion, up 48.4% from the year-ago quarter.
International segment operating income came in at $1.49 billion, up from $273 million reported in the year-ago quarter.
AWS segment operating income was $10.1 billion, up 8.8% from the year-ago quarter.
Balance Sheet & Cash Flow
As of June 30, 2025, cash and cash equivalents were $57.7 billion, down from $66.2 billion as of March 31, 2025.
Marketable securities totaled $35.4 billion as of June 30, 2025, up from $28.3 billion as of March 31, 2025.
The long-term debt was $52.6 billion at the end of the reported quarter, up from $53.3 billion at the end of the previous quarter.
Operating cash flow increased 12% to $121.1 billion for the trailing 12 months compared with $108 billion for the trailing 12 months ended June 30, 2024.
Free cash flow decreased to $18.2 billion for the trailing 12 months compared with $53 billion for the trailing 12 months ended June 30, 2024.
Guidance
Amazon stock dipped more than 7% in after-hours trading after projecting weaker-than-expected operating income for the third quarter and trailing the sales growth of its cloud rivals. Operating income is expected to be between $15.5 billion and $20.5 billion compared with $17.4 billion in the third quarter of 2024.
For third-quarter 2025, Amazon expects net sales between $174 billion and $179.5 billion, or to grow in the range of 10-13% compared with third-quarter 2024. This guidance anticipates an unfavorable impact of approximately 130 basis points from foreign exchange rates.