Amazon earnings updates: Wall Street watching for cloud demand, advertising strength

Analysts and investors are keeping an eye on Big Tech's generative AI spending. Amazon appears to be leading the charge with the biggest investment, having previously announced it expects increased capital expenditures this year of $100 billion to go largely towards AI, particularly for its AWS cloud unit.

CEO Andy Jassy previously said the massive investment was justified because AI is a "once-in-a-lifetime type of business opportunity."

"I think that both our business, our customers and shareholders will be happy, medium to long-term, that we're pursuing the capital opportunity and the business opportunity in AI," he said.

— Sarah Jackson

Amazon results will satisfy investors, but the rest of the year has Deutsche Bank

Deutsche predicts that strong retail sales and a weak dollar tailwind will help the firm beat estimates with $155.5 billion in net sales. However, first-quarter strength is likely to taper off over the coming months, as US tariffs directly cut into revenue.

Near-term weakness may seem unlikely given robust consumer activity in April, but that's also a result of consumers buying ahead of tariff-related price hikes.

"All in, we believe it best to be cautious at this point, and model total 2Q revenue growth $159bn ~170bps below the street."

Nervous investors should watch for how Chinese tariffs evolve, any impacts on advertising revenue, and how revenue moves in through the second-half of the year.

Meanwhile, improving AWS dynamics are a point of strength, as are Amazon Prime user trends.

Deutsche holds a "Buy" rating on the stock, with a $206 share price target.

Given that some of Amazon's largest sellers are China-based, any change in their import costs could significantly increase their sales price. Amazon CEO Andy Jassy said in a recent CNBC interview that those third-party sellers could potentially raise their prices due to the tariffs.

Amazon also buys many products wholesale from its vendors, who mostly source their products from China.

Some vendors previously told BI that Amazon has offered cost relief, only if they agree to strict margin guarantees. Meanwhile, internal teams have struggled with forecasting due to the tariff volatility.

Even the Amazon Web Services cloud business is preparing its employees to respond to customer questions about tariff hikes and other geopolitical issues, BI previously reported. Some analysts believe the tariffs will pressure sellers to purchase fewer ads on Amazon, further slowing down its advertising unit's growth rate.

Bernstein's Mark Shmulik wrote on Tuesday that Amazon could see a 1% to 4% negative impact on global revenues from "various tariff and macro scenarios."

— Eugene Kim

JPMorgan is upbeat heading into the e-commerce giant's results, pointing out that fundamentally bullish factors set the stage for a strong performance.

Though the bank's first-quarter expectations fall short of consensus estimates, Amazon is positioned for strength down the road. JPMorgan analysts project $154 billion in net sales and $17.3 billion in operating income.

"We remain bullish as AMZN drives non-Al growth & tightens the GenAl gap, which supports improved AWS trends in 2H," analysts wrote.

The bank expects AWS growth to pick up in the second half of the year, assuming macro uncertainty and supply disruptions ease.

While tariffs are the key threat in the near term, Amazon has options, JPMorgan said. Up to 40% of products are likely sourced from China, but the firm could pressure suppliers to assume these costs, reroute supply chains, cancel orders, or pass costs on to consumers.

JPMorgan rates Amazon "Overweight," with a $220 price target for the stock.

First quarter

• Net sales estimate: $155.16 billion

  • Online stores net sales estimate: $56.85 billion
  • Physical Stores net sales estimate: $5.41 billion
  • Third-Party Seller Services net sales estimate: $36.98 billion
  • Subscription Services net sales estimate: $11.65 billion
  • AWS net sales estimate: $29.36 billion
  • North America net sales estimate: $92.63 billion
  • International net sales estimate: $33.07 billion
• Third-party seller services net sales excluding F/X estimate: +6.92%
• Subscription services net sales excluding F/X estimate: +8.86%
• Amazon Web Services net sales excluding F/X estimate: +17.2%
• EPS estimate: $1.36

• Operating income estimate: $17.51 billion

  • Operating margin estimate: 11.2%
  • North America operating margin estimate: +6.65%
  • International operating margin estimate: 2.96%
• Fulfillment expense estimate: $23.78 billion
• Seller unit mix estimate: 61.8%

Second quarter

• Net sales estimate: $161.42 billion
• Operating income estimate: $17.85 billion
• Capital expenditure estimate: $26.93 billion

Full-year 2025

• Capital expenditure estimate: $104.3 billion

Source: Bloomberg