Amazon’s Q2 Earnings On Deck: Can AWS Growth Drive AMZN Forward?

Amazon (NASDAQ: AMZN) is poised to release its second-quarter 2025 earnings after the closing bell, with Mag 7 peers Microsoft and Meta both having posted beat and raise quarter's in the past 24 hours.

The consensus anticipates revenue of $162.11 billion, a 9.55% sales growth rate year-over-year, and earnings per share (EPS) of $1.33, up from $1.26 in the same quarter last year.

However, following a Q1 report where Amazon beat top-line estimates but offered conservative operating income guidance due to tariff anxieties and cost pressures, the market's reaction will hinge on more than just headline numbers.

Prime Day, expanded to a four-day event, is projected to provide a significant boost to retail sales, but some analysts caution that lower average selling prices could potentially moderate the impact on overall profitability.

Amazon Web Services (AWS) remains a focal point. In the first quarter, AWS revenue surged 17% year-over-year to $29.3 billion, boasting an impressive operating margin of 39.5%. Projections for Q2 estimate AWS revenue at $30.72 billion, indicating a 16.9% year-over-year growth.

The recent introduction of Amazon Nova models, including the Nova Sonic speech-to-speech foundation model and the Nova Act SDK, has bolstered AWS's AI capabilities. Furthermore, the deployment of Trainium 2 chips, promising enhanced price performance for AI workloads, is expected to strengthen AWS's competitive edge.

“We are constructive on the setup ahead of the report given encouraging U.S. retail data, healthy advertiser sentiment, strong AWS demand, and continued efficiency gains across the business that should drive upside to margin expectations,” notes Scott Devitt, Wedbush analyst, who raised the firm's price target on Amazon to $250 from $235.

However, the shadow of trade policies looms large. With approximately 60% of its revenue derived from North America, Amazon is particularly vulnerable to tariff fluctuations. Management has consistently emphasized the uncertainty created by evolving trade policies, and analysts warn that escalating tariffs present a challenging dilemma: absorbing the costs could squeeze profit margins, while passing them on to consumers may dampen sales.

Amazon's advertising segment continues to be a bright spot in its financial portfolio.

In the previous quarter, the advertising business generated $13.93 billion in revenue, demonstrating a robust 17.7% year-over-year increase, outpacing even AWS as Amazon's fastest-growing business. Citi projects that Q2 advertising revenue will expand by 17.5% year-over-year, excluding exchange rate effects.

Jefferies analysts have also expressed optimism, raising their price target for Amazon to $265, citing resilient revenues, cost discipline, and stable consumer demand as key drivers. They maintain a ‘Buy' rating on the stock, suggesting that despite recent gains, shares still present an attractive upside.

A 5.6% gain for the stock YTD is by no means disastrous, but it does have AMZN lagging markets leading in. Spare a thought for holders of another of the Mag 7 names in Apple, also slated to release earnings tonight, down 14% YTD.

With other tech names having delivered scorching earnings reports fresh in the memory, the pressure is on Amazon to show that it can keep up. Missed beats have been harshly punished by markets, and an inkling of weakness could see AMZN held up whilst others race ahead.