E-commerce and cloud titan Amazon (AMZN) has rallied over 22% since my last pre-earnings article on April 30. With Q2 results due at the end of this month, Wall Street remains resoundingly bullish. I believe the stock could reach new highs following the earnings print, fueled by robust consumer spending during record-breaking Prime Day sales, continued strength in AWS, and resilient advertising growth.
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AMZN Eyes Continued Growth
Amazon is scheduled to release its Q2 earnings on July 31st. Analysts expect earnings per share (EPS) of $1.32, representing a 5% year-over-year increase. Revenue is projected to reach approximately $162 billion, driven by consistent momentum in AWS, strong performance in the retail segment, and impressive gains in advertising.
In Q1, reported on May 1, Amazon delivered adjusted EPS of $1.59, significantly above the consensus estimate of $1.37 and up 62% from the $0.98 posted a year earlier. Revenue grew 10% YoY to $165.7 billion, and operating income surged 20% to $18.4 billion, underscoring operational strength. All in all, AMZN has a habit of beating analyst estimates. In fact, the online retail giant has outperformed expectations nine times in a row, according to TipRanks data.
AWS Remains the Core Profit Engine
Amazon, once a dominant force in SaaS, is rapidly transforming into a leader in AI-as-a-Service (AIaaS). With artificial intelligence poised to remain a cornerstone of its long-term strategy, Amazon is positioning AWS as the driving force behind its AI innovation.
AWS continues to be Amazon’s most profitable segment, generating 62% of the company’s operating income in Q1 2025. Despite stiff competition from Microsoft (MSFT), Amazon maintains a commanding lead in the global cloud market with over 30% market share.
Now operating at a $117 billion annual run rate, AWS posted 17% year-over-year revenue growth in Q1—driven largely by heightened demand for its AI-powered offerings. Operating margins climbed to 39.5%, up from 37.6% a year ago, underscoring AWS’s scalability and operational strength.
With demand for AI infrastructure outstripping supply, Amazon plans to invest more than $100 billion in AI-focused capital expenditures in FY2025, primarily to scale capacity in the first half of the year. Wall Street anticipates this aggressive investment will translate into stronger AWS performance in the second half, buoyed by a growing backlog and rising enterprise cloud spending.
Additionally, recent workforce reductions are expected to improve cost efficiency, supporting both revenue growth and margin expansion in the coming quarters.
GenAI Powers AMZN’s Retail Momentum
Amazon’s latest Prime Day event (July 8–11) delivered record-breaking results, easing concerns about tariff-related pressure on its retail business. U.S. online spending during the event soared to $24.1 billion—a 30.3% year-over-year increase—matching the sales volume of two Black Fridays.
While Amazon didn’t release exact figures, it confirmed that the 2025 Prime Day was its biggest ever. The event was notably extended to four days, doubling the traditional two-day format.
Generative AI played a key role in driving retail traffic and boosting automation across logistics and fulfillment, resulting in greater cost efficiency and operational gains. Amazon also benefited from reduced competition, as Chinese retailers like Shein and Temu scaled back their U.S. presence. These tailwinds—combined with strong consumer demand and improved operational leverage—are expected to push Amazon’s retail segment above analyst forecasts in the coming quarters.
New Business Verticals Include AI, Robotics, and Satellite Internet
Amazon is steadily broadening its technological reach, reinforcing its legacy of relentless innovation. In the coming years, the company is poised to become a major force in robotics, low-Earth orbit satellite internet, and autonomous mobility—strengthened by its expanding AI capabilities and proprietary Trainium2 chips.
One of its most ambitious initiatives, Project Kuiper, aims to deploy over 3,000 satellites to deliver high-speed internet access to millions worldwide. With its first satellites now in orbit, Amazon is progressing toward the FCC’s July 2026 mandate to launch at least 1,600 satellites. While the project carries significant risk, it represents a long-term opportunity with multi-billion-dollar revenue potential.
In parallel, Amazon is deepening its AI ecosystem through strategic acquisitions. A notable example is its purchase of Bee AI, a startup behind a $50 wearable that captures and summarizes users’ daily activities—enhancing Amazon’s data infrastructure and opening the door to new personalized services.
Through these ventures, Amazon is positioning itself at the intersection of next-generation connectivity, automation, and AI-powered consumer technology.
AMZN Boasts Attractive Valuation Relative to Peer Group
Given Amazon’s multifaceted business model, its EV/EBITDA ratio offers a more comprehensive valuation metric. Historically, Amazon has traded at premium multiples; however, the stock currently trades at just 15.3x forward EV/EBITDA—well below its five-year average of 18.7x, indicating an 18% discount.
For comparison, Amazon trades at a price-to-sales (P/S) ratio of 3.5x. In contrast, cloud computing and tech giant Microsoft trades at a P/S of 13.5x, while social networking company Meta Platforms (META) trades at a P/S of 9.5x.
Given its diversified business model, leadership in AWS, accelerated AI-driven growth, and strong momentum in retail and advertising, the valuation looks increasingly compelling for long-term investors.
Is Amazon a Buy, Hold, or Sell?
Wall Street appears decisively bullish. Ahead of this week’s earnings release (Thursday), analysts have continued to raise their price targets. Amazon holds a Strong Buy consensus, with 44 Buy ratings, 1 Hold, and zero Sells in the past three months. AMZN’s average price target of $2583.27 implies almost 12% upside potential over the next twelve months.
Amazon’s Long-Term Growth Story Remains Attractive
With tariff-related concerns fading, Amazon appears poised to continue its upward trajectory, driven by its core growth engines—AWS and AI. The company is also well-positioned to benefit from resilient consumer demand, record advertising performance, and the emergence of high-potential business verticals. Given the current setup, I see Amazon as a definitive Buy ahead of its Q2 earnings call this coming Thursday.