Amazon exceeded Wall Street predictions in the first quarter of 2025, recording a year-on-year profit surge of 62 per cent.
However, weaker than anticipated cloud results and a cautious forecast for the upcoming quarter were enough to push shares down in after-hours trading, as reported by .
This highlights the sensitivity of large tech valuations in an increasingly unstable economic and geopolitical environment.
A strong quarter, but a tepid outlook
The Seattle-based tech titan reported revenue of $155.7bn and net income of $17.1bn, or $1.59 per share, surpassing analyst expectations of $1.37 per share and $155.1bn in revenue.
This marks Amazon's third consecutive quarterly beat, indicating that consumer demand, while easing, remains robust.
Nevertheless, investors shifted their focus to the future.
Amazon projected second quarter revenue between $159bn and $164bn and operating income between $13bn and $17.5bn.
While the top line midpoint of $161.5bn slightly outperformed consensus, the profit forecast disappointed, particularly given Amazon's operating income exceeded $15bn in the first quarter.
Shares dropped more than two per cent after the bell on Thursday, erasing earlier gains.
"Amazon's second quarter guide suggests a modest revenue beat, but weaker margin expectations show the challenges ahead," commented Matt Britzman, senior equity analyst at Hargreaves Lansdown.
"It's a reminder that cost pressures and economic uncertainty are still weighing on even the most robust businesses."
AWS lags behind rivals
A significant portion of the letdown stemmed from Amazon Web Services (AWS), the company's cloud division, which raked in $29.3bn in revenue – a 17 per cent increase from the previous year, but slightly below expectations and lagging behind the growth reported by rivals Microsoft Azure and Google Cloud earlier this week.
"AWS's 17 per cent growth hasn't quite hit the mark", observed Britzman, noting that investors had hoped Amazon could harness the same AI momentum that propelled Microsoft to a stronger performance.
"The key question to answer is whether Amazon, like Microsoft, is still seeing cloud growth limited to supply chains", he further commented.
As expenditure on cloud services stabilises post-pandemic and investment in generative AI picks up pace, Wall Street is keeping a close eye on AWS.
The segment continues to be Amazon's primary profit driver, and any hint of stagnation carries significant weight.
Tariff tensions reignite political risk
Unexpectedly, Amazon's earnings announcement coincided with a resurgence of tariff disputes between the Trump administration and corporate America.
This week, the influential member of the so-called magnificent seven came under fire from the White House following reports that it planned to pass on tariff-related price hikes to customers – a move that press secretary Karoline Leavitt labelled a "hostile and political act."
Amazon refuted the reports, stating that the idea was "never approved", and Trump later revealed that he had directly contacted Jeff Bezos to voice his concerns.
"He sold the problem very quickly" the president stated.
However, this predicament underscores the political risks that Amazon and other tech behemoths face across the Atlantic.
Approximately half of its third-party vendors hail from China, and the fresh wave of tariffs – including a hefty 145% duty on certain goods, injects considerable unpredictability into its pricing and supply chain.
"It's hard to tell with tariffs how they're going to settle, and when they're going to settle", CEO Andy Jassy admitted during the earnings call.
"There has maybe never been a more important time to have the broadest possible selection, at the lowest possible prices."
Jassy also revealed that Amazon has been urging sellers to stock up ahead of tariff hikes and hinted that the company might be able to cushion some of the blow through scale or logistics.
Looking forward
Despite these challenges, Amazon's core advertising business continues to shine, registering a 19% year-on-year growth.
Coupled with robust e-commerce demand and a sturdy profit foundation, the company has various strategies to deploy even amidst a more turbulent macroeconomic backdrop.
However, with the shares down 17% year-to-date – faring worse than the S&P's 5% dip – investors are seeking greater clarity on Amazon's cloud trajectory and its strategy to navigate a politically charged tariff landscape in the latter half of the year.
The onus is on Jassy to steady AWS performance – as well as articulate how the tech giant can retain its competitive edge when cost pressures, regulation and political headwinds all collide.
