Amazon beats earnings expectations but AI cloud concerns rattle investors

Amazon posted a monster Q2 with $167.7B in revenue and $1.68 EPS, blowing past Wall Street expectations. But a weak profit outlook and lackluster AI progress at AWS sent the stock down 8%.

Amazon’s Q2 results were strong on paper

Amazon delivered a 13% year-over-year revenue jump, reaching $167.7 billion, and crushed EPS forecasts with $1.68 per share versus the expected $1.33. The retail giant also posted a solid 18% jump in AWS revenue ($30.87B) and a 23% surge in ad revenue ($15.7B), outperforming analyst expectations across key segments.

• Online store sales: $61.5B (+11%)
• Third-party seller services: $40.3B (+11%)
• Subscription services (Prime, etc.): $12.2B (+12%)
• Physical stores: $5.6B (+7%)
• Shipping costs: $23.4B (+6%) 📦

All this while battling tariffs, rising costs, and a freight recession.

But the market didn’t care — guidance stole the spotlight

Despite the beat, Amazon’s stock slid after it projected Q3 operating income between $15.5B and $20.5B — short of Wall Street’s $19.5B expectation at the midpoint. Revenue guidance ($174B to $179.5B) did beat expectations, but it wasn’t enough to soothe concerns.

Investors are increasingly impatient with Amazon’s $100B annual AI spend. AWS is supposed to be the engine of that transformation. But while AWS still leads in cloud infrastructure, it grew just 18% — trailing Microsoft Azure’s 39% and Google Cloud’s 32% growth.

AI leadership questions are mounting

Andy Jassy tried to calm nerves by pointing to AWS backlog growth (+25% YoY to $195B) and a “significant leadership position” in cloud. But Wall Street isn’t buying it. Analysts say Amazon’s commentary didn’t do enough to address the perception that AWS is falling behind in the generative AI arms race.

As one Wedbush analyst put it, AWS’s growth and margin trends may become a “structural overhang.”

Retail and advertising are doing the heavy lifting

While AWS struggles to keep pace with the AI hype, Amazon’s traditional ecommerce engine is still humming. Online retail and third-party sellers posted double-digit growth, and ad revenue surged 23%, making Amazon the clear number three in digital ads behind Meta and Google.

Consumer demand remains resilient, even with inflation and tariffs in play. According to Jassy, Amazon hasn’t seen “diminished demand” or “meaningfully appreciating prices” in 2025.

The bottom line for operators

Amazon isn’t in trouble — far from it. It’s still printing billions, expanding margins, and outpacing the market in retail and ads. But the market wants clarity on AI. AWS needs to prove it’s not just surviving but leading.

For ecommerce operators, the takeaway is this:

• Amazon’s retail flywheel is still spinning. Don’t bet against its DTC power.
• Ad dollars are moving to retail media — and Amazon’s dominance here will continue.
• But AI cloud? That’s where the uncertainty lives.

Investors want Amazon to pick up the pace. Operators should watch where the dollars — and data centers — go next.