Amazon (AMZN) delivered a solid financial performance for the first quarter of 2025, posting its fourth consecutive earnings beat with EPS of $4.59—far surpassing consensus expectations of $1.37.
Revenue came in at $155.7 billion, up 8.6% year-over-year, matching Street expectations despite currency headwinds. But while the numbers looked strong at first glance, investors quickly turned cautious. The company’s outlook for Q2 left markets underwhelmed, sending the stock down nearly 5% after hours on Thursday.
The concern stems primarily from Amazon’s unusually wide and lower-than-expected guidance range for operating income in the second quarter—between $13 billion and $17.5 billion, below analysts’ average forecast of $17.8 billion. Sales are projected between $159 billion and $164 billion, bracketing consensus of $161.4 billion. The company attributed this broad range to “substantial uncertainty” driven by economic, geopolitical, and trade-related risks, most notably tariffs on Chinese imports.
Tariff Risks, Consumer Uncertainty Cloud the Outlook
Amazon executives offered few specifics on how tariffs could impact Q2, but the potential fallout loomed large during the earnings call. CEO Andy Jassy acknowledged “no attenuation of demand yet,” but noted signs of “heightened buying” in certain categories—suggesting that some consumers or sellers may be stockpiling in anticipation of future price hikes.
The White House’s move to close the “de minimis” loophole—ending tariff exemptions for small packages from China—could disproportionately affect Amazon’s third-party marketplace and logistics ecosystem, both of which rely heavily on low-cost Chinese imports. This puts pressure on Amazon not just from the supply side, but also from its base of small and mid-sized sellers, who face higher costs and may pull back on ad spending, potentially threatening one of Amazon’s fastest-growing revenue streams.
Advertising revenues grew 18% year-over-year to $13.9 billion, in line with expectations, but the slowing growth of third-party seller services—up just 6% to $36.5 billion—suggests early signs of stress. Analysts warn that continued pressure on these sellers could weigh on the company's high-margin segments and overall profitability in the coming quarters.
AWS Growth Slows Amid AI Competition, Macro Headwinds
Amazon Web Services (AWS), the company’s cloud computing arm, posted a 17% year-over-year sales increase to $29.3 billion, aligning with expectations but marking its slowest growth in a year. While AWS continues to benefit from the secular trend of enterprises shifting workloads to the cloud—especially around generative AI applications—the results fell short of the blowout quarter reported by rival Microsoft (MSFT) Azure earlier this week.
More than 85% of global IT spending remains on-premises, Amazon noted, leaving ample long-term runway for AWS. Yet the near-term trajectory is clouded by economic uncertainty and intensifying competition, prompting some analysts to revise growth estimates downward for the remainder of the year.
Investors Eye Margin Risk, Long-Term Strategy
While Amazon has historically weathered economic turbulence better than most, the scale of uncertainty this time around is causing analysts to rethink their bullish assumptions. Raymond James, Oppenheimer, UBS, and Benchmark all lowered their price targets for Amazon ahead of the earnings release, citing margin pressures, rising capital intensity, and a potential slowdown in both AWS and core retail growth.
Amazon’s first-quarter operating income grew 20% to $18.4 billion, exceeding the company’s own guidance. But investors are focused on whether Amazon can sustain that momentum in a more volatile operating environment. The company is leaning on promotional events—such as the Big Spring Sale and the upcoming Prime Day—to drive value for consumers, but margin preservation remains a balancing act.
In a research note, DA Davidson warned that while AWS growth was steady, Amazon’s margins could face headwinds from absorbing tariff costs in order to protect customer pricing. CFO Brian Olsavsky emphasized that the company is planning for “various outcomes,” adding that Amazon remains committed to “doing everything we can to keep prices low.”
Conclusion
Amazon’s Q1 performance was strong, but the fog hanging over Q2 has become harder to ignore. Tariff exposure, cloud growth uncertainty, and consumer spending pressures are all converging in ways that test the retail and tech giant’s adaptability. While long-term fundamentals remain intact, the coming quarters could prove turbulent, with investors watching closely to see how Amazon navigates one of its most complex macro environments in years.
Considering a $1,000 investment in these companies?
Our team at Stock Investor carefully curated a list of top stocks with the potential for significant returns, suitable for beginners and seasoned investors alike who are eager to learn a trade and unearth the best stocks to buy. Though not featured in this article, these selected stocks could be game-changers in the future.For those seeking dynamic trading experiences, consider joining our Swing Trade Alerts, Option Income Alert, or our Trading Room. Take advantage of our special offer today, starting at just $1 in the first month.
Unlock the secrets of Smart Money
Explore how billionaires and institutions are influencing the market. Follow their every move with DarkOption Flow and stay updated on essential market insights. Begin your journey to informed investing today!
Education
And if you're a fan of Invest opedia, you'll appreciate what we offer at SharperTrades even more. Explore our comprehensive option trading course and technical trading course, where you can learn trading, analyze stocks, delve into chart patterns for stocks, and gain invaluable insights for making the best company investments.
Unlock Your Stock Market Edge with SharperTrades. Dive into powerful trading tools, learn a trade, and receive expert guidance. Stay up-to-date with regular market updates. Learn trading, basics of investing, and how to pick the best stocks to buy. Whether you're a beginner or seasoned investor and trader, we've got you covered. Get started for free, today!