ii view: Amazon reverses as outlook turns cautious
Shares in this iconic retailer and cloud data hosting business have underperformed the Nasdaq 100 index year-to-date. Buy, sell or hold?
1st August 2025 11:57
by Keith Bowman from interactive investor
Second-quarter results to 30 June
- Net sales up by 13% to $168 billion (£126 billion) year-over-year
- Operating income up 31% to $19.2 billion
- Earnings per share of $1.68, up from $1.26 per share
Guidance:
- Expects Q3 sales of between $174 billion and $179.5 billion, giving year-over-year growth of 10-13%
- Operating income expected to be between $15.5 billion and $20.5 billion, compared with $17.4 billion in Q3 2024
Chief executive Andy Jassy said:
“Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I’m excited for what lies ahead.”
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ii round-up:
Amazon.com Inc (NASDAQ:AMZN) delivered sales and profit that beat Wall Street hopes but with the tech titan failing to reassure regarding the pace of future growth.
Second-quarter sales climbed 13% to $168 billion (£126 billion), pushing earnings up 33% to $1.68 per share. Analysts had forecast $162 billion and $1.33 per share respectively. The retailing and cloud data hosting mammoth expects profits for the quarter ahead of between $15.5 billion and $20.5 billion, potentially down from $17.4 billion achieved in Q3 2024.
Shares for the Nasdaq 100 company fell 6% in afterhours US trading having come into these latest results up 7% year-to-date. The Nasdaq 100 is up 11%. Shares for fellow cloud data hosting providers Microsoft Corp (NASDAQ:MSFT) and Google owner Alphabet Inc Class A (NASDAQ:GOOGL) are up 27% and 1% respectively.
Sales at Amazon’s AWS cloud data business rose 17.5% year-over-year to $31 billion. Cloud data sales for rivals Microsoft and Alphabet each rose more than 30% during the most recent quarter.
Sales at the North American business excluding AWS and including the core retail business rose 11% from a year ago to $100 billion. International revenues on the same basis climbed 16% to $37 billion.
Amazon expanded its AI based Alexa+ shopping assistant to millions of customers during the quarter.
Management forecasts group-wide revenues of between $174 billion and $179.5 billion the current third quarter, potentially generating growth of 10-13%.
Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, highlighting Amazon as a ‘top pick’ and flagging target price of $300 per share.
ii view:
Founded in 1994, Amazon today employs over 1.5 million people. As well as Alexa, other group brands include Prime TV, competing against rivals such as Netflix and Apple, and Fire devices such as tablets and sticks. Geographically, its home US market generated 68% of 2024 sales. Germany, the UK and Japan provide other key markets with sales at around 5% each, and the rest of the world coming in at around 14%.
For investors, intense competition in the cloud data area also includes the likes of International Business Machines Corp (NYSE:IBM) and Oracle Corp (NYSE:ORCL). US trade tariffs offer potential to raise costs for goods from China, for example. Government concerns regarding big-tech dominance have not gone away, while high borrowing costs continue to place pressure on consumer’s disposable income.
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To the upside, investment in AI services continues, with the popularity of its Alexa devices offering interesting potential. The founding retail business is now accompanied by significant other businesses such as AWS and advertising. Potential to expand the group’s physical store portfolio persists, while brands such as Nike are looking to use Amazon as an alternative online store to their own website offering.
In all, and despite ongoing risks, strong market share for what are now highly established global businesses are likely to see investors remain optimistic about long-term prospects.
Positives
- Dominant position in online retailing
- Pushing AI initiatives and investments
Negatives
- Government concerns for monopolistic powers
- Currency movements can hinder performance
The average rating of stock market analysts:
Buy
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