Amazon’s Stock (NASDAQ: AMZN) Gains Pre-Market as Earnings Loom Large

Amazon's stock price (NASDAQ: AMZN) has given up much of the 12 month gains (+3%) during early 2025, with a 16% YTD decline leaving holders wondering what comes next. With earnings after today's closing bell, answers could be coming sooner rather than later, but what can we expect?

Analysts are projecting an EPS of $1.37 (+25.1% YoY) on revenue of $155.13 billion (+8.9% YoY). Key areas of focus will undoubtedly be the growth trajectory of AWS (consensus +12% YoY to $25.4B), the continued acceleration of Amazon's high-margin advertising business (estimated +18% YoY to $11.8B), and margin improvement in its North American retail operations (target +150 bps to 4.1%).

Given Amazon's history of surpassing EPS estimates (averaging a 22% beat over the last eight quarters), could markets be underestimating the firm leading into earnings?

Despite delivering a staggering ~780% return since 2015, Amazon's recent performance paints a picture of increased volatility. The stock's journey in 2025 has been anything but smooth. While Q4 2024 earnings reported in February surpassed expectations on both revenue ($187.8B) and EPS ($1.86), the accompanying Q1 2025 guidance fell short of consensus estimates, primarily citing foreign exchange headwinds ($2.1B impact) and escalating capital expenditures. This cautious outlook triggered a sell-off, erasing early year gains and highlighting market sensitivity to near-term profitability concerns.

Trading at $184.42, the stock has shown recent resilience, clawing back more than 10% over the past seven trading sessions. However, this recovery follows a period of significant turbulence, marked by disappointing forward guidance, heavy investment pressures, and macroeconomic anxieties. Looking out over a longer period, and the 61% gain over five years pales in comparison to some of it's tech peers, with the ETF tracking the Magnificent 7 itself having gained 83% since it's inception a little over two years ago.

What Comes Next for AMZN?

Central to Amazon's narrative is its aggressive investment in AI. CEO Andy Jassy's recent shareholder letter framed this as a “once-in-a-lifetime” opportunity, backed by a colossal $100 billion capital expenditure plan for 2025, significantly up from $83 billion in 2024. This spending fuels AWS's expansion, development of custom AI chips like Trainium, and deployment of generative AI tools like Amazon SageMaker and the Nova model. While AWS’s AI revenue is reportedly growing at triple-digit rates, the sheer scale of investment has clearly weighed on investor sentiment regarding near-term free cash flow and margins.

With a projected $63 billion in free cash flow for 2025, Amazon retains significant financial firepower to fund its AI ambitions and potentially accelerate share repurchases.

However, significant risks remain. The ongoing Federal Trade Commission (FTC) antitrust lawsuit hangs over the company, representing a potential $120 billion valuation risk and threatening structural changes to its marketplace model. Competition in the cloud space remains fierce, with Microsoft Azure and Google Cloud collectively capturing significant market share, even as AWS leads in high-margin AI services.

Labor costs continue to rise, evidenced by average wage increases and sporadic disruptions like the Teamsters-led strike late last year, although Amazon maintains these have not had material financial impact. Furthermore, the strong U.S. dollar continues to create currency translation headwinds in international markets.

Analysts continue to rate the future prospects highly, with a consensus price target of $244 almost 30% to the upside of current price action. With the latest U.S GDP numbers coming in light of expectations, questions will no doubt be raised regarding the health of the consumer. Microsoft's earnings beat after yesterday's close, along with that of Meta, has seen markets buoyant this morning. Amazon's stock is riding some of that wave, with a 3.97% pre-market gain leading into earnings building on expectations of an AMZN beat.