Amazon earnings recap: Company 'maniacally focused on' keeping prices low amid light Q2 guidance

Amazon's stock is trading 2% lower after-hours as the call ends.

"What you've seen just in the last few months is really the explosion of coding agents," Jassy says while discussing AWS. One such agent is Cursor, which uses AI to edit code for users.

Jassy said that "there's maybe never been a more important time in recent memory" to keep prices low and offer a wide selection of products on Amazon as now, when shoppers are worried about tariffs.

Many third-party sellers have brought in inventory to the US ahead of the tariffs to keep prices low, Jassy said. But Amazon has over two million sellers, he added, and some might opt to eventually raise prices for shoppers while others avoid it.

"We have a lot of different sellers in a lot of different countries, and not all of them will pursue the same tact," Jassy said.

CEO Andy Jassy says that Amazon hasn't seen the average selling price of items on its website go up "appreciably" yet due to tariffs.

But, he adds, Amazon sellers on its marketplace have an advantage over many more-established retailers: Many sellers on Amazon sell products directly from China.

That's different from other retailers, which often rely on suppliers who source from China before adding their own markups, Jassy said.

"The total tariff will be higher for these retailers than for China direct sellers" on Amazon's marketplace, Jassy said.

Jassy also compared the tariff environment to the early days of the COVID pandemic, when many customers turned to Amazon for deals on masks and hand sanitizer. At the time, Amazon was a reliable source for these items due to its price and selection, he said.

"We have emerged from these uncertain eras with more relative market segment share than we started and better set up for the future," Jassy said. "I'm optimistic this could happen again."

Amazon's call has started. CEO Andy Jassy, CFO Brian Olsavsky, and head of investor relations Dave Fildes are on the call. Analysts are listening for their remarks on AWS's growth, Amazon's AI investments, and how the company is navigating tariffs.

AWS's sales came in slightly below analysts' expectations on Thursday. That's "concerning given its outsize role as a profit driver" for Amazon, wrote Sky Canaves, principal analyst at EMARKETER, a Business Insider sister company.

That leads to a "big question," Canaves said: Will Amazon cut back on its planned $100 billion in capex spending in 2025? Amazon was one of the big tech companies that indicated it had plans to spend big on AI infrastructure last earnings season.

Amazon was also likely able to beat its guidance for the first quarter as shoppers stocked up on goods ahead of tariffs on imports, Canaves said.

"Though Amazon bears heavy long-term exposure to tariffs on Chinese imports, the company remains better positioned than most in the retail industry" to manage the situation, Canaves said after the company reported its results.

In its earnings release, Amazon added "tariff and trade policies" as one of the many unpredictable factors affecting its financial results. It appears tariffs are already having an impact: Amazon's second quarter operating income guidance was between $13 billion and $17.5 billion, far below the $17.85 billion street estimate.

— Eugene Kim

First quarter

* Net sales: $155.67 billion, +8.6% y/y, estimate $155.16 billion

** Online stores net sales: $57.41 billion, +5% y/y, estimate

$56.85 billion

** Physical Stores net sales: $5.53 billion, +6.4% y/y, estimate

$5.41 billion

** Third-Party Seller Services net sales: $36.51 billion, +5.5%

y/y, estimate $36.98 billion

** Subscription Services net sales: $11.72 billion, +9.3% y/y,

estimate $11.65 billion

** AWS net sales: $29.27 billion, +17% y/y, estimate $29.36

billion

** North America net sales: $92.89 billion, +7.6% y/y, estimate

$92.63 billion

** International net sales: $33.51 billion, +4.9% y/y, estimate

$33.07 billion

* Third-party seller services net sales excluding F/X: +7% vs.

+16% y/y, estimate +6.92%

* Subscription services net sales excluding F/X: +11% vs. +11%

y/y, estimate +8.86%

* Amazon Web Services net sales excluding F/X: +17% vs. +17% y/y,

estimate +17.2%

* EPS: $1.59 vs. $1.86 q/q, estimate $1.36

* Operating income: $18.41 billion, +20% y/y, estimate $17.51

billion

** Operating margin: 11.8% vs. 10.7% y/y, estimate 11.2%

** North America operating margin: +6.3% vs. +5.8% y/y, estimate

+6.65%

** International operating margin: 3% vs. 2.8% y/y, estimate

2.96%

* Fulfillment expense: $24.59 billion, +10% y/y, estimate $23.78

billion

* Seller unit mix: 61% vs. 61% y/y, estimate 61.8%

Second quarter

* Operating income: $13.0 billion to $17.5 billion, estimate
$17.82 billion

* Net sales: $159.0 billion to $164.0 billion, estimate
$161.42 billion

Source: Bloomberg data

Investors have been paying more attention to Amazon Web Services in recent years because the company's cloud arm accounts for most of its profits.

Amazon's leadership said in the last earnings call said they expect AWS to get a multibillion-dollar revenue boost from its AI business, which is growing at a "triple-digit percentage" year-over-year. They also said capacity constraints over AI chips and server components would ease in the second half of this year, which could accelerate growth.

While Amazon's retail arm is expected to feel most of the tariff pain, some analysts expect a broader spending slowdown could eat into AWS's revenue.

Investors will also be watching how AWS cloud services measure up against Microsoft's Azure, which was a significant point of focus when Microsoft released its earnings report on Wednesday.

According to Flexera, a software asset and cloud management company, "the battle for the top cloud provider has been a two-horse race" between AWS and Azure.

When it comes to small and medium-sized businesses, Flexera finds that organizations are more likely to choose AWS for their public cloud workloads than any other provider, with 77% running some or significant workloads with AWS.

— Eugene Kim & Katherine Li

"The retail business powers high-margin services businesses like Prime, advertising, and FBA, and is core to the company's capacity to effectively double-monetize its investment in content," according to William Blair analysts.

So when one arm takes a hit — the others do too.

"It is not simply about selling the same item at like or lower prices with better convenience. If the model is for any reason starved of breadth, it creates problems deeper into the more profitable parts of the business, which we believe are damaging and hard to game out," the analyst commentary said.

— Lakshmi Varanasi

Flagging consumer confidence and mounting trade barriers will affect Amazon's near-term margins, but Goldman remains bullish about its wider potential.

For the first quarter, Goldman adjusted its estimates to reflect these looming headwinds, assuming that tariffs hurt demand and boost product costs.

But the bank said that Amazon can mitigate costs associated with its dependence on Chinese markets by reducing exposure and reorienting toward domestic merchandise.

"AMZN continues to be the most debated stock among our wider coverage universe on the back of higher global trade tensions," analysts wrote.

The bank estimates Amazon will post $154.5 billion in revenue.

"Looking long-term, AMZN remains one of our top picks and provides investors with a range of exposures to virtually all key secular growth themes across Consumer Internet and Cloud Computing."

Goldman holds a "Buy" rating with a $220 target on the Amazon stock.

Wall Street analysts said in April that AWS paused discussions for several data center deals, particularly international ones. They took it as a sign of moderation for AWS's data center expansion after a couple of years of frenzied growth.

The findings followed earlier reports of similar moves by Microsoft, which also halted some data center projects.

In response, Kevin Miller, VP of data centers at AWS, wrote on LinkedIn that the changes were "routine" and that AWS continues to see "strong demand" for generative AI.

"Some options might end up costing too much, while others might not deliver when we need the capacity," Miller wrote. "Other times, we find that we need more capacity in one location and less in another. This is routine capacity management, and there haven't been any recent fundamental changes in our expansion plans."

— Eugene Kim

Bank of America is gearing up for a strong first quarter, though it sees "uncharted (and tariffed) seas" ahead.

BofA is banking on several positives to boost Amazon's first quarter results, predicting net sales to beat consensus estimates at $155.5 billion.

Positive factors to expect include:

1. A solid first-quarter retail result due to tariff-boosted demand
2. A strong second-quarter outlook due to elevated inventory ahead of tariffs
3. Dollar market tailwinds
4. Efficiencies decreasing cost-to-serve
5. Better-than-expected AWS results, paired with encouraging AI demand commentary

As with other banks, BofA anticipates disruptions related to the trade war, but it's sticking with its upbeat outlook on the potential for Amazon to be a winner of a future trade deal.

"We acknowledge 2Q & 2H revenue uncertainty (retail, ads and Cloud), but remain confident on Amazon's ability to take share in eCommerce, improve retail margins via headcount cuts, & benefit from Cloud AI demand," analysts wrote.

Bank of America maintains its "Buy" rating, and holds a price objective of $225.

Amazon was in the news this week over reports that it planned to display how much tariffs are contributing to the price of goods on its main website, though the company denied that such a move was in the works. White House press secretary Karoline Leavitt said the idea would be viewed by the administration as a "hostile and political act."

Peter Cohan, associate professor of management at Babson College and a venture capitalist, told BI that tariff transparency could help customers understand why prices are going up, especially for small businesses, many of which also sell on Amazon.

"The obvious reason why the White House doesn't want this is because it makes it obvious how much their policy is costing consumers," Cohan told BI earlier this week. "It's going to drive down the poll ratings because consumers will be extremely aware of how much more they're paying and who's causing them to pay it."

— Katherine Li

Amazon will beat first-quarter estimates with $155.2 billion in revenue and $18.1 billion in operating profits.

That's according to CFRA, which expects upside coming from a week dollar, a consumption spike, and faster growth in advertising, cloud, and subscriptions.

While the firm agrees with Wall Street about the potential for downside later in the year, it's a risk that's already priced into the stock, it wrote. "That said, our current estimates do not reflect a recession scenario, which could materially affect more cyclical segments such as advertising and AWS."

At the same time, CFRA expects Amazon to gain new market share as tariffs disrupt e-commerce. The end to the de minimis exemption — which excludes cheap goods from tariffs — would make Amazon more competitive against firms such as eBay and Temu.

With capex top of mind for investors, CFRA suggested that Amazon could slow down investments amid macroeconomic turbulence.

On April 24, CFRA lowered Amazon's price target to $245 per share.

Analysts and investors are keeping an eye on Big Tech's generative AI spending. Amazon appears to be leading the charge with the biggest investment, having previously announced it expects increased capital expenditures this year of $100 billion to go largely towards AI, particularly for its cloud computing division, AWS.

CEO Andy Jassy previously said the massive investment was justified because AI is a "once-in-a-lifetime type of business opportunity."

"I think that both our business, our customers and shareholders will be happy, medium to long-term, that we're pursuing the capital opportunity and the business opportunity in AI," he said.

— Sarah Jackson

Amazon's first-quarter results will satisfy investors, but the rest of the year has Deutsche Bank feeling cautious.

Deutsche predicts that strong retail sales and a weak dollar tailwind will help the firm beat estimates with $155.5 billion in net sales. However, first-quarter strength is likely to taper off over the coming months, as US tariffs directly cut into revenue.

Near-term weakness may seem unlikely given robust consumer activity in April, but that's also a result of consumers buying ahead of tariff-related price hikes.

"All in, we believe it best to be cautious at this point, and model total 2Q revenue growth $159bn ~170bps below the street."

Nervous investors should watch for how Chinese tariffs evolve, any impacts on advertising revenue, and how revenue moves in through the second-half of the year.

Meanwhile, improving AWS dynamics are a point of strength, as are Amazon Prime user trends.

Deutsche holds a "Buy" rating on the stock, with a $206 share price target.

Given that some of Amazon's largest sellers are China-based, any change in their import costs could significantly increase their sales price. Amazon CEO Andy Jassy said in a recent CNBC interview that those third-party sellers could potentially raise their prices due to the tariffs.

Amazon also buys many products wholesale from its vendors, who mostly source their products from China.

Some vendors previously told BI that Amazon has offered cost relief, only if they agree to strict margin guarantees. Meanwhile, internal teams have struggled with forecasting due to the tariff volatility.

Even the Amazon Web Services cloud business is preparing its employees to respond to customer questions about tariff hikes and other geopolitical issues, BI previously reported. Some analysts believe the tariffs will pressure sellers to purchase fewer ads on Amazon, further slowing down its advertising unit's growth rate.

Bernstein's Mark Shmulik wrote on Tuesday that Amazon could see a 1% to 4% negative impact on global revenues from "various tariff and macro scenarios."

— Eugene Kim

JPMorgan is upbeat heading into the e-commerce giant's results, pointing out that fundamentally bullish factors set the stage for a strong performance.

Though the bank's first-quarter expectations fall short of consensus estimates, Amazon is positioned for strength down the road. JPMorgan analysts project $154 billion in net sales and $17.3 billion in operating income.

"We remain bullish as AMZN drives non-Al growth & tightens the GenAl gap, which supports improved AWS trends in 2H," analysts wrote.

The bank expects AWS growth to pick up in the second half of the year, assuming macro uncertainty and supply disruptions ease.

While tariffs are the key threat in the near term, Amazon has options, JPMorgan said. Up to 40% of products are likely sourced from China, but the firm could pressure suppliers to assume these costs, reroute supply chains, cancel orders, or pass costs on to consumers.

JPMorgan rates Amazon "Overweight," with a $220 price target for the stock.

First quarter

• Net sales estimate: $155.16 billion

  • Online stores net sales estimate: $56.85 billion
  • Physical Stores net sales estimate: $5.41 billion
  • Third-Party Seller Services net sales estimate: $36.98 billion
  • Subscription Services net sales estimate: $11.65 billion
  • AWS net sales estimate: $29.36 billion
  • North America net sales estimate: $92.63 billion
  • International net sales estimate: $33.07 billion
• Third-party seller services net sales excluding F/X estimate: +6.92%
• Subscription services net sales excluding F/X estimate: +8.86%
• Amazon Web Services net sales excluding F/X estimate: +17.2%
• EPS estimate: $1.36

• Operating income estimate: $17.51 billion

  • Operating margin estimate: 11.2%
  • North America operating margin estimate: +6.65%
  • International operating margin estimate: 2.96%
• Fulfillment expense estimate: $23.78 billion
• Seller unit mix estimate: 61.8%

Second quarter

• Net sales estimate: $161.42 billion
• Operating income estimate: $17.85 billion
• Capital expenditure estimate: $26.93 billion

Full-year 2025

• Capital expenditure estimate: $104.3 billion

Source: Bloomberg