Amazon's Q2 2024 Earnings Disappoint Investors with Slowing AWS Growth and High Capex

Amazon reported 13% revenue growth and 33% growth in earnings per share, beating expectations. AWS revenue grew by 17%, but fell short of rival Microsoft's 34% growth. Amazon remains a powerful competitor with a lot of ways to win, but investors were scrutinizing profitability forecasts in light of continued spending on capital assets. The company's operating expenses were up 11% and free cash flow decreased to $18.2 billion for the trailing 12 months.

Amazon.com, Inc. (NASDAQ: AMZN) has announced its second-quarter results, showcasing robust growth across multiple segments. Net sales increased by 13% to $167.7 billion, compared to $148.0 billion in the second quarter of 2024. Excluding the $1.5 billion favorable impact from foreign exchange rates, net sales grew by 12% year-over-year. The North America segment saw an 11% increase in sales to $100.1 billion, while international sales rose by 16% to $36.8 billion, or 11% excluding currency impacts. AWS segment sales increased by 17.5% to $30.9 billion.

Operating income climbed to $19.2 billion, up from $14.7 billion in the same period last year. The North America segment's operating income was $7.5 billion, a 47% increase, while the international segment's operating income rose to $1.5 billion, up 366%. AWS segment operating income increased to $10.2 billion, a 9% rise.

Net income surged to $18.2 billion, or $1.68 per diluted share, compared to $13.5 billion, or $1.26 per diluted share, in the second quarter of 2024. Operating cash flow increased by 12% to $121.1 billion for the trailing twelve months, while free cash flow decreased to $18.2 billion for the same period, down from $53.0 billion a year ago.

Amazon's CEO, Andy Jassy, highlighted the company's advancements in AI, noting that AI is transforming customer experiences, innovation, and operational efficiency. The company has expanded Alexa+ to millions of customers, launched AI models like DeepFleet, and introduced new tools such as Kiro and Bedrock AgentCore.

However, investors are scrutinizing Amazon's profitability forecasts, given the continued spending on capital assets. Operating expenses rose by 11%, and free cash flow decreased significantly, raising concerns about the company's financial health.

Amazon's forward-looking statements for the third quarter 2025 project net sales between $174.0 billion and $179.5 billion, with a growth rate between 10% and 13% compared to the third quarter of 2024. Operating income is expected to be between $15.5 billion and $20.5 billion.

Despite these challenges, Amazon remains a formidable competitor with a broad range of business segments and a strong brand. The company continues to innovate and expand its services, which could drive future growth.

References:
[1] https://ir.aboutamazon.com/news-release/news-release-details/2025/Amazon-com-Announces-Second-Quarter-Results/