Amazon Q1 Earnings Preview: Spotlight on AWS, Tariffs, and Capex Surge

As amazon prepares to report its Q1 2025 earnings on May 1 after the close, investors face a mixed bag of opportunities and risks. The company is riding a wave of strong operating income momentum from Q4, yet forward-looking commentary—especially around tariffs and the slowing pace of AWS growth—has created a more cautious tone in the market.

Expectations are modestly high: factset consensus forecasts EPS of $1.37 and revenue of $155.13 billion. Amazon’s own guidance calls for revenue between $151.0 and $155.5 billion and operating income of $14–18 billion. While currency headwinds and calendar shifts (notably the Leap Year effect) help explain the conservative guidance, the big questions going into the print center around margin durability, AWS growth trends, and how Amazon plans to navigate a potentially disruptive tariff regime.

Commerce and Tariff Sensitivity

E-commerce remains a core engine of Amazon’s business, but it is also at the center of tariff-related concerns. The recent 125% tariff on select Chinese imports has led Amazon to query its third-party sellers on supply chain disruptions, pricing strategies, and order flow, according to WSJ. UBS notes that U.S. goods often carry imported content between 55% and 71%, implying tariff pass-through could suppress demand. Arun Sundaram of CFRA flagged this as the top concern for margins, especially in Amazon’s third-party seller segment.

Ask Aime: What's the outlook for Amazon's Q1 earnings, and how will tariffs affect its margins?

While Amazon doesn’t directly absorb product costs for 3P sales, its take-rate could be pressured if Chinese sellers retreat or if volume falls. CFRA expects Q1 revenue growth of 8.3% year-over-year and operating income of $18.1 billion—above consensus—driven by continued margin expansion in e-commerce from supply chain optimization and improved delivery efficiency.

Watch: Can AWS keep Amazon’s margins aloft—or will tariffs and spending short-circuit the story?

AWS: Demand Still Strong, Margins in Focus

AWS will once again be under the microscope. The segment grew 19% in Q4, but most analysts are now expecting deceleration to the mid-teens. CFRA forecasts 16.5% year-over-year growth to just over $29 billion for Q1, while BofA pegs Street expectations closer to 17.4%.

CEO Andy Jassy recently described AI demand as “insatiable,” and AWS remains on track to be a $100B+ annualized business. However, Wells Fargo industry checks indicate AWS is pausing some data center lease signings, particularly overseas, echoing moves by Microsoft. While not a sign of long-term weakness, it does suggest digestion of prior capacity and may cap near-term growth. Mizuho noted some enterprise clients are beginning to delay cloud spend decisions post-tariff headlines.

The key metric to watch is AWS operating margin, which could compress short-term due to Amazon’s intensified infrastructure investment.

CapEx Surge and Long-Term Strategy

Amazon’s 2025 capital expenditure guidance—now at a whopping $105 billion, up from $83 billion in 2024—is among the most closely watched metrics. Most of this spending will go toward AWS expansion and AI capabilities, including chips and data centers. OpCo and Stifel both highlight that this investment may weigh on AWS margins in the short term, but analysts like BMO and Citi remain constructive, calling the spending cycle a forward-looking moat that positions Amazon to benefit disproportionately from the AI shift. Project Kuiper, Amazon’s low-orbit satellite initiative, is also ramping up with its first commercial launches underway, offering long-term optionality in global internet delivery.

Ad Revenue and Marginal Segments

Advertising, Amazon’s third growth pillar, could see some pressure this quarter. UBS lowered its 2025 advertising estimates, citing directional headwinds. Meanwhile, segments like Amazon Pharmacy and grocery remain long-term upside options, but they are unlikely to materially move the Q1 numbers. Nonetheless, analysts remain focused on the trend of operating income improvement, especially given Amazon’s margin gains over the last eight quarters.

Investor Sentiment and Q2 Setup

Consensus appears to expect a relatively in-line Q1, but the focus will quickly pivot to Q2 and beyond. CFRA’s Sundaram points out that tariff impacts may lead Amazon to issue wider or softer guidance next quarter, a trend echoed by Citi and Truist. That said, BofA sees potential front-loaded demand in March as customers raced to beat rising prices, which could create Q2 tailwinds. Wolfe Research, despite lowering estimates, still expects Amazon to gain share and consolidate its position amid industry volatility.

Amazon Q4 2024 Earnings Recap: Margin Strength Carries the Day Despite Cautious Outlook

Amazon delivered a solid Q4 earnings report that beat expectations on both earnings and operating income, though forward guidance introduced a note of caution that left analysts recalibrating their expectations for the year ahead. The company reported Q4 revenue of $187.8 billion, up 10% year-over-year and at the high end of guidance, while operating income surged 61% to $21.2 billion, exceeding consensus by over $2 billion. EPS came in at $1.86, well ahead of the $1.50 estimate. Margin expansion—especially in North America and International segments—was a clear highlight, aided by improved fulfillment efficiency and an upgraded U.S. inbound logistics network.

AWS revenue rose 19% year-over-year to $28.8 billion, in line with estimates, but analyst commentary suggested expectations were subdued following Microsoft and Google Cloud results. Notably, management acknowledged AWS is still constrained by chip and energy availability, a bottleneck expected to ease in the second half of 2025. Analysts broadly see AWS on the cusp of a major AI-driven growth cycle, with triple-digit AI revenue growth reported and a CAPEX surge to match. Amazon now guides 2025 capital expenditures to approximately $105 billion—up sharply from $83 billion in 2024—largely aimed at expanding AWS capacity and advancing its AI infrastructure.

While Q4 results were broadly celebrated, Amazon’s Q1 2025 guidance fell short of consensus on the revenue line. The company cited a combination of headwinds including FX (120bps), and tougher comps. It expects Q1 constant-currency revenue growth of 6.5% to 10.5% year-over-year. Still, the company guided for operating income to rise 18% year-over-year at the high end, suggesting continued margin discipline. Analysts including those at Piper, BMO, and Stifel flagged this as a key point of strength, with many lifting their price targets on the view that profit growth can continue even amid top-line uncertainty.

Looking ahead, Amazon’s leadership reiterated its bullish view on AI, describing it as the biggest opportunity since the internet. The company’s model-agnostic strategy in supporting a wide range of AI workloads is expected to pay dividends as enterprise demand for generative AI continues to scale. While short-term retail growth may face tougher comps, the long-term setup looks favorable if AWS supply constraints lift and margin discipline holds. Consensus revenue estimates may come down modestly, but bullish analysts see opportunity on any weakness, citing the company’s strengthening cash flow profile and dominant market position across cloud, retail, and logistics.Conclusion

The path for Amazon remains strategically attractive but tactically noisy. Investors will be laser-focused on AWS growth rates and margins, e-commerce tariff pass-throughs, and any commentary that clarifies whether the capex surge will translate into sustainable revenue acceleration or drag near-term profitability. With several firms—including CFRA, BofA, and Mizuho—expecting upside to operating income despite modest top-line risk, the tone of Amazon’s earnings call may determine whether shares resume their uptrend or enter a recalibration phase.