Amazon.com (AMZN) stock was down about 5% in after-hours trading despite beating Q2 earnings estimates by 26%. The e-commerce giant reported EPS of $1.68, which easily surpassed analyst expectations of $1.33 and also climbed 33% from the previous year.
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Further, net sales rose 13% year-over-year to $167.7 billion, beating Wall Street’s expectations of $162.2 billion. Excluding currency effects, revenue grew 12%, reflecting strength across its business segments.
Operating cash flow increased 12% to $121.1 billion. However, free cash flow declined 65.6% to $18.2 billion, reflecting heavy investment in infrastructure and AI.
AWS Drives Growth
Amazon Web Services (AWS) continues to be the company’s key profit driver, with sales up 17.5% to $30.9 billion and operating income climbing to $10.2 billion. CEO Andy Jassy highlighted the role of AI in AWS’ momentum, citing new tools like Bedrock AgentCore, Kiro IDE, and DeepFleet, which are helping customers build and deploy intelligent agents at scale.
On the retail front, North America sales rose 11% to $100.1 billion, while international sales jumped 16% to $36.8 billion. The company’s biggest-ever Prime Day and expanded same-day delivery helped drive this growth. Also, AMZN launched new storefronts with brands like Nike (NKE) and Marc Jacobs, and launched generative AI features, which helped drive sales.
It must be noted that Amazon spent $32.2 billion on infrastructure last quarter, an 83% jump from last year, as it ramps up investment in AI. Also, this exceeded analyst expectations of $26.4 billion, which raised concerns about near-term cash flow and margin pressure.
Solid Guidance Despite Uncertainty
Along with positive results, Amazon provided an outlook for the third quarter that exceeded the consensus estimates despite macro uncertainties and tariff risks.
AMZN expects Q3 net sales between $174 billion and $179.5 billion, reflecting 10% to 13% growth above analysts’ estimate of $173.27 billion.
Also, operating income is projected between $15.5 billion and $20.5 billion, compared with $17.4 billion in the third quarter of 2024. The Street currently has an estimate of $19.49 billion.
Is Amazon a Buy, Hold, or Sell?
Turning to Wall Street, AMZN stock has a Strong Buy consensus rating based on 44 Buys and one Hold assigned in the last three months. At $259.76, the average Amazon stock price target implies a 10.96% upside potential.
However, it’s worth noting that estimates will likely change following today’s earnings report.
