Amazon Q2 Earnings Beat on Revenue and Profit, But AWS Growth Miss Dampens After-Hours Stock Reaction

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Amazon’s latest quarterly results beat expectations on both earnings and revenue, but investor enthusiasm faded in after-hours trading as AWS growth failed to deliver the blockbuster surprise seen from Microsoft’s cloud business earlier this week. Shares slipped about $5 after the report, reflecting disappointment that Amazon Web Services didn’t deliver an upside shock despite solid overall performance and strong guidance for Q3.

The company reported Q2 earnings of $1.68 per share, topping the $1.33 consensus estimate by $0.35. Revenue rose 13.3% year-over-year to $167.7 billion, well ahead of the $162.2 billion consensus and slightly above the top half of its prior $159–$164 billion guidance range. Operating income also came in stronger than expected at $19.2 billion, compared with guidance of $13.0–$17.5 billion, underscoring continued efficiency improvements.

Despite those headline beats, the market reaction was muted. AWS, Amazon’s key profit engine, posted revenue of $30.9 billion, up 17.5% year-over-year and broadly in line with the ~$30.7 billion consensus. While the growth rate was healthy — and an improvement from the 16% YoY pace expected — it fell short of the upside surprise some investors had hoped for, especially after Microsoft Azure’s strong beat earlier in the week. AWS operating income came in at $10.2 billion, representing margins of about 33%, below the 39% margins seen last quarter and under the 35% forecast range. This left cloud investors questioning whether Amazon can accelerate growth meaningfully in the near term.

Advertising was a bright spot. Ad services revenue surged 22% year-over-year to $15.7 billion, comfortably ahead of the +19% YoY growth analysts had penciled in. Prime Day promotions, continued connected TV (CTV) adoption, and strong demand for sponsored product ads powered the segment. The results reinforce advertising as Amazon’s fastest-growing high-margin business, providing a key counterweight to softer AWS margins.

North America retail delivered solid growth, with segment sales up 11.1% to $100.1 billion, outpacing expectations for ~8% growth. Operating income of $7.5 billion marked a significant margin expansion from $5.1 billion last year, landing within the 4.5%–7.7% margin range analysts expected. International retail also impressed, with sales climbing 16.1% year-over-year (11% in constant currency) to $36.8 billion. Notably, the segment delivered $1.5 billion in operating profit compared to a mere $0.3 billion last year, validating expectations for a turn to positive margins around 1.5%.

CEO Andy Jassy emphasized Amazon’s growing AI initiatives in the earnings release, highlighting the expansion of Alexa+, new developer tools like Kiro, and enterprise products like Bedrock AgentCore. He pointed to AI as a driver of both efficiency and future growth across retail, AWS, and logistics. “Our conviction that AI will change every customer experience is starting to play out,” Jassy said, positioning Amazon as a long-term beneficiary of generative AI adoption.

Guidance for Q3 came in above Wall Street’s expectations, with Amazon forecasting net sales between $174.0 billion and $179.5 billion versus consensus of $173.3 billion. Operating income is expected to range between $15.5 billion and $20.5 billion, compared with $17.4 billion in Q3 2024. The guidance suggests continued double-digit growth, with FX tailwinds of around 130 basis points.

Still, the market remains cautious. Investors had grown accustomed to Amazon consistently outperforming consensus in AWS, and the lack of a major beat weighed on after-hours sentiment. Free cash flow was another point of scrutiny, falling sharply to $18.2 billion over the trailing twelve months from $53.0 billion a year earlier, reflecting elevated capital expenditure. CapEx for FY25 remains forecast around $112 billion, driven by AWS buildouts, AI infrastructure, and Project Kuiper’s satellite network rollout.

The results also came against a backdrop of tariff-related uncertainty, which continues to hang over North America retail margins. Analysts noted that while Amazon has managed costs well, trade policy remains a risk to pricing and profitability in consumer-facing segments.

Overall, Amazon delivered a strong quarter on paper, beating expectations across revenue, EPS, and operating income, while guiding confidently for Q3. Advertising strength and retail margin expansion stood out as clear positives. However, with AWS growth landing in line rather than ahead of lofty expectations, the stock struggled to extend gains in after-hours trading. Given its ~22% rally since May, valuation at ~32x FY26 earnings, and reliance on AWS as the profit driver, the bar for upside surprises remains high.

For now, Amazon continues to execute well across its diverse businesses, but investor focus will stay trained on AWS growth trajectories and whether AI investments can translate into a meaningful acceleration in cloud demand — the key factor likely to drive the next leg higher in the stock.