Amazon Q2 Earnings Preview: Retail, AWS, Ad Margins and What to Watch
Amazon Q2 Earnings Preview: Retail, AWS, Ad Margins and What to Watch
By:Gus Downing
And don’t forget AI, margin signals, E‑commerce resilience and cloud cost pressures
- Amazon reports their Q2 FY2025 earnings after the market closes on Thursday.
- Primary factors include AI development, AWS revenue, retail margins, advertising strength, macroeconomic uncertainty and forward guidance.
- The company’s stock is currently up 43% from Liberation Day lows, but only 6% year-to-date.
From delivering packages to you in less than 24 hours to supplying the backbone for the internet, Amazon (AMZN) does it all these days. The company’s stock has risen dramatically from its Liberation Day lows but still lags behind some Magnificent Seven peers.
The Q2 earnings call scheduled for Thursday will determine whether Amazon can maintain this momentum, or if it’s time for the stock to breathe for a bit. Let’s dive into the fundamentals, catalysts and risks the company is facing ahead of its earnings report.
Wall Street is watching revenue, EPS and cloud numbers
Consensus analyst estimates for Amazon’s second-quarter revenue land at $162.18 billion, with a projected earnings per share (EPS) of $1.33. These estimates reflect year-over-year (YoY) increases of 9.5% and 5.5%, respectively. Additionally, analysts expect Amazon’s Q3 revenue guidance to be roughly the same as this Q2, with Q3 guidance estimates ranging between $159 and $164 billion.
Wall Street also expects $16.7 billion in operating income and $30.7 billion in AWS revenue, for YoY increases of 14% and 17%, respectively. Should that estimate of $16.7 billion in operating income hold up, it would boost their operating margin from 9.9% in Q1 to 10.6% in Q2.
Additionally, consensus predictions call for 6% YoY growth in e-commerce, 12% quarter-over-quarter (QoQ) growth in advertising revenue and a boost in total sales of 5% YoY.
What could drive Amazon above expectations
As with any tech company in the modern age, AI development will be paramount to Amazon’s earnings call. Investors will be on high alert for news about the development of Amazon’s new AI offerings — like Nova, Trainium 2 and Bedrock AgentCore.
Additionally, retail margins will be a major focal point. Amazon’s North American retail operating margins were on a slow but steady decline for multiple quarters but recovered to about 6% in Q1. Continued improvement to unit economics amid tariff pressures would be a major bullish indicator for the company.
Advertising revenue is also an emerging segment for Amazon, and has been strengthening with each passing quarter. Continued strength in ad sales, particularly on Prime Video and Twitch, would lend itself to meaningful high-margin revenue lift, another bullish factor.
Lastly, of course, is guidance. Outlook for AI-led AWS revenue growth, growth merchandise volume (GMV) ahead of Prime Day and potential capital expenditure (CapEx) ramp-up will all be key pieces in this call.
Risks that could cloud a strong quarter
The biggest factor that could slow Amazon down is margin pressure. If tariffs, logistics costs or FX headwinds bite, retail margins could fall below expected ranges. AWS growth also falls into this category because its margins are forecast to dip to 35% in Q2, compared to 39% in Q1because of those increases in CapEx.
Macroeconomic uncertainty is also hard to ignore ahead of Amazon’s report — as is true with all retail and e-commerce companies in the present day. Consumer spending softness, tariff expirations on Aug. 1, and a weakening US dollar could all dent growth momentum.
Guidance could also work as a bearish factor. Amazon has given a wide range for guidance on operating income, from $13 billion to $17.5 billion, which leaves room for conservative forecasts that fall short of the expectations mentioned earlier.
Effects of past reports — and what this one might do
AMZN has been ripping upward alongside the rest of the market since its Liberation Day lows, currently trading almost 43% above those levels. However, it’s up just under 6% YTD, a stark contrast with some of its Magnificent Seven contemporaries like Nvidia (NVDA), Microsoft (MSFT) and Meta (META).
The stock is trading at a reasonable forward P/E of about 36x, with analysts maintaining an average price target of $249, a modest 7.8% higher than current levels. Implied volatility from its options chain is pricing in a 6.5% move on earnings day, which is slightly below recent averages.
This leaves scope for an outsized reaction in either direction and indicates traders should proceed with an abundance of caution when taking any pre-earnings positions.
Gus Downing is host of the tastylive Network show Risk and Reward. @GainsByGus
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