Amazon Q2 FY2025 Earnings Preview: Balancing AI Growth, AWS Strength, and Tariff Risks

TradingKey - Amazon.com, Inc. (NASDAQ: AMZN) is scheduled to report its Q2 FY2025 earnings on Thursday, July 31, 2025, after the U.S. market closes. The earnings call will begin at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).

Market Forecast

Source: Amazon Q1 FY2025 Earnings Release, Visible Alpha, Goldman Sachs, J.P. Morgan, Morgan Stanley, TradingKey

Where Investors Should Watch

AWS Growth and AI: AWS is expected to continue to be a pivotal growth driver, supported by its extensive cloud service portfolio and strong momentum in AI platforms like Bedrock and Amazon Q. Supply constraints for GPUs and server components may temper the onboarding of new AI workloads this quarter, so investors should watch for management’s updates on these supply-side challenges. Amazon’s aggressive $100 billion FY2025 capital expenditure plan, heavily focused on AI infrastructure and data center expansion, shows the strategic imperative to maintain AWS’s competitive edge. With Microsoft Azure and Google Cloud narrowing the gap, commentary on AWS’s market share dynamics and enterprise adoption of AI offerings will be critical.

Retail Segment and Tariff Pressures: The North America retail business, representing nearly 60% of total revenue, is projected to grow 8–10% YoY. However, tariff-related cost inflation poses risks to margins and pricing strategies. Amazon’s Q2 operating income guidance was below the street consensus, reflecting caution amid trade uncertainties. How Amazon manages pricing, fulfillment speed, and any shifts in consumer and seller behavior will be closely watched, especially given the potential impact of tariffs and broader macroeconomic pressures.

Advertising Momentum: Amazon’s advertising business is expected to remain a key profitability driver, driven by strong demand for Prime Video ads and sponsored product placements. This high-margin business is also subject to volatility linked to corporate advertising budgets and macroeconomic cycles. Management’s commentary on ad revenue trends and advertiser sentiment will be important indicators.

CapEx and Operational Efficiency: Amazon’s unprecedented $100 billion CapEx plan for FY2025 supports long-term growth areas including AI, Project Kuiper, and its fulfillment network overhaul. While such capital intensity has significantly pressured free cash flow, down nearly 50% in Q1 following an 80% CapEx surge, this level of investment is vital to maintain competitive leadership amid rapid industry innovation. It will be important to assess how management balances investment with operational efficiency, while continuously tracking progress in optimizing returns and controlling costs during this period of sustained capital spending.

Conclusion

For Amazon’s Q2 FY2025 earnings report, it is crucial to evaluate management’s commentary on AI monetization timelines, tariff mitigation strategies, and CapEx plan. Strong AWS and advertising results may support optimism, but tariff pressures and elevated investments could weigh on near-term margins. Maintaining exposure into the earnings release could be considered, but close attention should be paid to guidance indicating sustained retail margin pressure or AWS growth decelerating below 15%. Conversely, indications of easing AI hardware bottlenecks or strong enterprise AI adoption could suggest Amazon’s current ~36x forward P/E may be undervalued, supporting a positive view of its long-term growth prospects.

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