Amazon beats on profits, but tariff uncertainty weighs on stock
Amazon topped Wall Street expectations in the first quarter of 2025, posting a 62 per cent jump in profit year on year.
But a softer than expected cloud result and a cautious outlook for the coming quarter were enough to send shares lower in after-hours trading.
This reflects the sensitivity of big tech valuations in an increasingly volatile economic and geopolitical climate.
A strong quarter, but a tepid outlook
The Seattle-based tech giant reported revenue of $155.7bn and net income of $17.1bn, or $1.59 per share, outperforming analyst expectations of $1.37 per share and $155.1bn in revenue.
It was Amazon’s third consecutive quarterly beat, a sign that consumer demand, while softening, remains intact.
Yet investors focused instead on what’s ahead.
Amazon guided for second quarter revenue between $159bn and $164bn and operating income betweem $13bn and $17.5bn.
While the top line midpoint of $161.5bn slightly beat consensus, the profit forecast dissapointed, especially given Amazon’s operating income topped $15bn in the first quarter.
Shares fell more than two per cent after the bell Thursday, giving up earlier gains.
“Amazn’s second quarter guide suggests a modest revenue beat, but weaker margin expectations show the challenges ahead”, said Matt Britzman, senior equity analyst at Hargeraves Lansdown.
“It’s a reminder that cost pressures and economic uncertainty are still weighing on even the most robust businesses”.
AWS lags behind rivals
Much of the disappointment came from Amazon Web Services (AWS), its cloud unit, which generated $29.3bn in revenue – up 17 per cent from the prior year, but slightly short of consensus and well behind growth posted by Microsoft Azure and Google Cloud earlier this week.
“AWS’s 17 per cent growth hasn’t quite hit the mark”, Britzman noted, adding that investors were hoping Amazon could ride the same AI tailwinds that propelled Microsoft to a stronger beat.
“The key question to answer is whether Amazon, like Microsoft, is still seeing cloud growth limited to supply chains”, he added.
As cloud spending normalises post-pandemic and generative AI investment accelerates, Wall Street is watching AWS closely.
The segment remains Amazon’s main profit engine, and any signal of stagnation weighs heavily.
Tariff tensions reignite political risk
Unexpectedly, Amazon’s earnings landed in the middle of a renewed tariff clash between Trump administration, and corporate America.
This week, the influential member of the so-called magnificent seven drew fire from the White House after reports suggested it would display tariff related price increases to customers – a move press secretary Karoline Leavitt called a “hostile and political act”.
Amazon denied the reports, saying the idea was “never approved”, and Trump later said he called Jeff Bezos directly to express his concern.
“He sold the problem very quickly” the president said.
Still, the issue highlights the political exposure facing Amazon, and other tech titans across the pond.
Roughly half of its third party sellers are based in China, and the new round of tariffs – including a 145 per cent duty on some goods, adds significant uncertainty to 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”, said chief executive Andy Jassy 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 added that Amazon has been encouraging sellers to buy inventory ahead of tariff increases and hinted that the company may be able to buffer some of the impact through scale or logistics.
Looking ahead
Despite the headwinds, Amazon’s core ad business remains a bright spot, growing 19 per cent year on year.
Combined with resilient e-commerce demand and a solid profit base, the company has levers to pull even in a more volatile macro landscape.
But with the stock down 17 per cent year to date – worse than the S&P 5 per cent drop – investors seem to want more clarity on Amazon’s cloud trajectory and how it will navigate a politically fraught tariff environment heading into the second half of the year.
The pressure remains on Jassy to stabilise AWS perfromance – as well as articulate how the big tech can maintain its edge when cost pressures, regulation and political headwinds all converge.