Amazon Q2 Earnings: 4 Key Takeaways

Amazon's Q2 earnings exceeded expectations with $167.7 billion in net sales and earnings of $1.68 per share. Despite this, the stock fell 7% in after-hours trading due to weak profit guidance for Q3. CEO Andy Jassy said tariffs haven't had a major impact on the business, but it's unclear who will absorb the higher costs. Amazon is competing with Elon Musk's Starlink in the satellite-based broadband internet market, with Jassy citing price and existing relationships with enterprise and government clients as key differentiators.

Amazon (AMZN) reported its second-quarter earnings after the bell on Thursday, surpassing Wall Street expectations. The e-commerce giant posted net sales of $167.7 billion and earnings per share (EPS) of $1.68, both exceeding analyst estimates of $162.1 billion in revenue and $1.33 in EPS [1]. Despite the strong financial performance, Amazon's stock fell more than 2% in after-hours trading, largely due to the company's Q3 guidance.

The company guided for Q3 net sales of between $174 billion and $179.5 billion, which was higher than the consensus estimate of $173.2 billion. However, the operating income guidance for Q3 was lower than expected, with the range set at $15.5 billion to $20.5 billion, compared to the Wall Street target of $19.5 billion [1].

CEO Andy Jassy attributed the stock drop to the weaker-than-expected AWS operating income guidance. AWS, Amazon's cloud computing division, saw revenue of $30.8 billion, just above the expected $30.7 billion. While this was an improvement over the $26.2 billion in Q2 last year, it did not meet the high expectations set by the market [1].

Jassy also noted that while tariffs have not had a significant impact on the business, the higher costs could be absorbed by the company or passed on to customers. He emphasized that Amazon's pricing strategy and existing relationships with enterprise and government clients are key differentiators in the competitive satellite-based broadband internet market, where it faces competition from Elon Musk's Starlink [2].

In the satellite broadband race, Amazon's Project Kuiper is poised to challenge Starlink. Project Kuiper, with its innovative "half-duplex" terminal design and tight integration with AWS, is expected to offer lower manufacturing costs and better performance than Starlink [2]. While Starlink has a significant lead with over 6 million global users, Project Kuiper is closing the gap with a planned commercial rollout by the first half of 2026 [2].

Amazon's strong Q2 performance is a positive sign for the company, but the stock drop underscores the market's concern over the Q3 outlook. As Amazon continues to navigate the competitive landscape of satellite broadband and cloud computing, investors will be closely watching the company's ability to maintain its growth trajectory and manage costs.

References:
[1] https://finance.yahoo.com/news/amazon-announces-q2-earnings-above-wall-street-expectations-better-than-expected-q3-guidance-172501759.html
[2] https://finance.yahoo.com/news/amazon-kuiper-poised-challenge-starlink-103501116.html