Amazon's Q3 Earnings Disappoint, AI Expenses Take Center Stage

Amazon projected Q3 operating income of $15.5-20.5 billion, missing analysts' estimates of $19.4 billion. Sales are expected to be $174-179.5 billion, above the $173.2 billion average estimate. Revenue at Amazon Web Services grew 17% to $30.9 billion. The stock declined 2.5% in after-market trading after closing at $234.11. CEO Andy Jassy is facing challenges from an AI infrastructure arms race with Microsoft and Alphabet, as well as competition from Walmart in e-commerce.

Amazon (AMZN) has provided its third-quarter (Q3) financial outlook, with revenue projections above market estimates and strong performance from its cloud computing unit, Amazon Web Services (AWS). The company expects Q3 sales to be between $174.0 billion and $179.5 billion, exceeding analysts' average estimate of $173.2 billion [1]. Operating income is forecasted to range from $15.5 billion to $20.5 billion, slightly missing analysts' expectations of $19.4 billion [1].

AWS, Amazon's cloud unit, reported a 17.5% increase in revenue to $30.9 billion, surpassing expectations of $30.77 billion [1]. This growth is driven by strong demand for AI services and capacity expansion [2]. Despite AWS's robust performance, Amazon's stock declined by 2.5% in after-market trading after closing at $234.11 [3].

Amazon's retail business continues to face challenges from U.S. tariffs, but the company remains confident in its ability to navigate these pressures. The company's e-commerce unit, which still makes up the largest portion of its overall revenue, has seen strong consumer demand, with sales totaling $61.4 billion, up 11% [3].

CEO Andy Jassy is facing challenges from an AI infrastructure arms race with Microsoft and Alphabet, as well as competition from Walmart in e-commerce. Amazon has been investing heavily in AI infrastructure, but concerns about its AI model development remain [1]. The company expects to increase capital expenditures to more than $100 billion in 2025, with a majority going toward building out capacity for AI in AWS [3].

Investors have been closely watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. Despite the challenges, Amazon's focus on low prices, quick delivery, and a wide range of product categories has helped it maintain its position as the top e-commerce retailer in the U.S. [1].

References:
[1] https://ca.finance.yahoo.com/news/amazon-projects-quarterly-revenue-above-200421211.html
[2] https://www.investopedia.com/what-analysts-think-of-amazon-stock-ahead-of-earnings-q2-fy2025-update-11778459
[3] https://www.geekwire.com/2025/amazon-tops-q2-estimates-with-167-7b-in-revenue-19-2b-in-profits-aws-up-17-to-30-9b/