Will Amazon's Q2 2025 results justify current analyst optimism?

When is Amazon reporting?

Amazon will hold its earnings conference on Friday, 1 August 2025 at 6.00am (AEST), after United States (US) markets close, todiscuss its second-quarter (Q2) financial performance with analysts and investors.

Q1 2025 performance

Amazon's first-quarter (Q1) results provided a mixed picture for investors. The company delivered solid revenue growth, slightly beating analyst expectations across key financial metrics. Operating income impressed more significantly than revenue, demonstrating Amazon's ability to control costs effectively.

However, management's guidance for Q2 2025 disappointed some investors. The weaker-than-expected profit outlook raised questions about the sustainability of current growth rates.

The quarter also saw Amazon launch its new artificial intelligence (AI) assistant Alexa+ and expand its Nova foundational models. These developments highlight the company's continued focus on AI capabilities.

Q1 2025 financial metrics

Earnings expectations for Q2 2025

Wall Street 

• Revenue: $162.0 billion
• Revenue growth: 9.5% year-on-year (YoY), showing continued expansion even when measured against strong prior-year results
• Operating income: $16.7 billion, marking a 13.8% increase YoY
• Operating margin: 10.6%, improvement from 9.9%

Amazon's own guidance

• Revenue: between $159 billion and $164 billion
• Operating income: $13.0 billion to $17.5 billion, with the wide range reflecting ongoing uncertainty.

The Wall Street consensus estimates align with the higher end of management guidance, suggesting analysts are confident about Amazon's ability to navigate current market challenges in Q2.

Financial results expectations

What to watch for

AWS cloud business faces intensifying competition

AWS remains crucial to the company's profitability, contributing 19% of total revenue. The cloud division is expected to grow 17.4% YoY in Q2.

However, AWS faces mounting pressure from competitors. Microsoft's Azure and Google Cloud have been aggressively pursuing market share, reducing AWS's dominance from 33% in Q1 2022 to 29% in Q1 2025.

The company announced redundancies in AWS last week, alongside plans for further workforce reductions over the coming years. Management believes artificial intelligence can automate many current tasks, supporting Amazon's key strategy of expanding AWS operating margins to improve overall company profitability.

AWS achieved a record operating margin of 39.5% in Q1. Investors will scrutinise whether this level can be maintained whilst fending off competitive pressure from rivals.

Trade policy uncertainty creates headwinds

Amazon faces significant challenges from evolving trade policies. The e-commerce giant sources products globally while generating 60% of revenue from North America, making it vulnerable to tariff changes.

Management highlighted 'substantial uncertainty' from trade policies in the previous earnings call. Investors will seek clarity on how Amazon plans to navigate these challenges.

Higher tariffs create a difficult choice for Amazon. Absorbing costs would damage margins, while passing them to consumers could reduce purchasing power and sales.

The complexity of constantly changing trade rules also increases administrative burden. Amazon must continually adjust pricing strategies and supply chain management to remain compliant yet competitive.

Amazon Q1 2025 net sales breakdown by region

AI opportunities beyond cloud services

Amazon has numerous opportunities to monetise AI beyond AWS. The company's vast customer database provides rich material for improving advertising algorithms and targeting, which could drive higher margins through better conversion rates and increased advertiser spending.

AI could significantly enhance inventory management and logistics operations. These improvements might help Amazon reduce costs whilst improving customer experience and delivery times.

The company's Alexa+ launch demonstrates commitment to AI-powered consumer products. Success here could open new revenue streams beyond traditional e-commerce and cloud services.

Analyst sentiment remains broadly positive

Wall Street analysts maintain overwhelmingly positive views on Amazon. According to London Stock Exchange Group (LSEG) data, 69 out of 73 analysts assign 'buy' or 'strong buy' ratings to the stock.

Average price targets have improved from $240 after Q1 results to $251.34 currently, albeit still below March peaks around $266. This suggests potential upside of approximately 10% from recent trading levels (as of 23 July 2025).

Amazon historical trends and average price targets

TipRanks assigns Amazon a Smart Score of 9 out of 10. This quantitative metric suggests strong support across technical, fundamental, and sentiment indicators (as of 22 July 2025).

Amazon TipRanks smart score

Among the 'Magnificent Seven' technology stocks, Amazon ranks fourth in year-to-date returns (as of market close on 22 July 2025). The company's valuation sits at the higher end within the group, as indicated by its 33.5 times forward price-to-earnings (P/E) ratio.

Valuation and performance of the 'Magnificent Seven'

Amazon technical analysis

Amazon's shares have recovered strongly from April lows, trading within the upper Bollinger Band range. This technical setup suggests the current bullish trend remains intact for now.

A better-than-expected earnings report could drive the stock price above $233 resistance. The next key level sits at February's high of $242.5.

Disappointing results might see Amazon test support near $213.4, the lower Bollinger Band boundary. This level could prove crucial for maintaining the current upward trend.

The earnings announcement will likely determine near-term price direction. Traders should monitor both fundamental results and technical level reactions for trading opportunities.

Amazon's daily price chart

• _{Source: TradingView. The figures stated are as of 23 July 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}