Amazon Stock Drops 5% as AWS Revenue Misses Expectations, Tariff Concerns Grow

Amazon's latest financial report exceeded market expectations, with earnings per share for the first quarter of 2025 at $1.59, surpassing the consensus estimate of $1.37. The company's revenue for the quarter was $155.7 billion, slightly above analyst estimates of $155.2 billion. The revenue guidance for the next quarter was set between $159 billion and $164 billion, with the midpoint aligning with market expectations of $161.2 billion.

However, the cloud computing division, amazon Web Services (AWS), showed signs of weakness. AWS revenue was $29.3 billion, slightly below the market expectation of $29.4 billion, making it the only segment that did not meet expectations. This underperformance in AWS, coupled with broader market concerns about tariff risks, led to a significant drop in Amazon's stock price during after-hours trading on Thursday, falling by as much as 5%.

Analysts had previously highlighted the uncertainty surrounding tariff policies as a major risk for Amazon. ubs analyst Stephen Ju, who maintained a "buy" rating on Amazon's stock, lowered the target price from $272 to $253, citing tariff policy uncertainty as a key concern. The potential impact of tariffs on Amazon's future earnings and profitability has been a growing worry for investors, overshadowing the positive aspects of the financial report.

Amazon had previously been reported to be considering displaying tariff costs in detail on consumer orders, but the company quickly denied these reports. The White House indicated that such a move would be seen as a "provocative and politically motivated action." Despite these denials, the market's focus on tariff risks has continued to weigh on Amazon's stock price, which has fallen by 13% year-to-date. While Amazon's core business remains robust, concerns about the sustainability of profit growth, the slowing growth of AWS, and broader macroeconomic uncertainties have kept pressure on the stock.

Amazon's warning about the potential impact of tariffs and trade policies on its second-quarter guidance has added to market concerns. The company's guidance was based on expectations up to May 1, and any new developments in tariff policies could significantly affect its financial performance. Investors are cautious about the potential risks posed by tariffs and trade policies, despite Amazon's strong financial performance. The stock price decline during after-hours trading reflects the market's concern about the potential impact of tariffs on Amazon's future earnings and profitability.