AWS Q2 2025: Unpacking Contradictions on AI Demand, Supply Constraints, and Revenue Fluctuations

Revenue and Earnings Growth:
- Amazon reported revenue of $167.7 billion for Q2 2025, up 12% year-over-year excluding foreign exchange impacts.
- The growth was driven by strong performance across stores and expansion in areas like Amazon Pharmacy, along with continued investment in AWS and AI services.

AWS Performance and AI Demand:
- AWS revenue grew 17.5% year-over-year, with an annualized revenue run rate over $123 billion.
- AWS experienced strong demand due to advancements in generative AI, non-generative AI, and increasing infrastructure investments like custom AI chips.

International Segment Improvements:
- The international segment saw revenue increase by 11% year-over-year, with an operating margin improvement of 320 basis points to 4.1%.
- The growth was due to improvements in productivity and cost reductions, with benefits particularly in established markets like the UK, Germany, and Japan.

Tariff Impact on Retail:
- Despite concerns about tariffs affecting retail prices, Amazon reported no significant increase in ASPs or customer demand due to diversified seller strategies and price advantage.
- The company is closely monitoring tariff impacts and remains prepared for potential changes.

Alexa+ and AI Innovations:
- Amazon is advancing its AI capabilities with Alexa+, which significantly enhances user engagement and interaction, with early adoption showing positive feedback.
- This innovation is expected to contribute to increased engagement, potential advertising opportunities, and subscription services in the future.