Amazon’s stock declined sharply by 8% on Friday following the release of its second-quarter earnings report, which, while surpassing expectations on several fronts, ultimately failed to satisfy Wall Street’s appetite. Despite posting strong revenue growth and profits, and showing resilience amid evolving tariff policies, investors were disappointed by the company’s profit guidance and the relatively modest expansion of Amazon Web Services (AWS) compared to cloud rivals.
The quarter’s results exposed a complex picture: robust growth in retail sales and advertising, a positive outlook for the current quarter, but also an intensifying cloud competition and an increased capital expenditure budget driven by aggressive investments in artificial intelligence (AI).
Below are three essential takeaways from Amazon’s earnings report:
Amazon disclosed that it incurred $31.4 billion in capital expenditures during the last quarter alone, with company leadership indicating that this figure is likely to remain “reasonably representative” throughout the second half of 2025. This marks a notable jump from the $24 billion spent in the first quarter. Taken together, these figures suggest Amazon could exceed $118 billion in total capital expenditures for the year, up substantially from its earlier forecast of $100 billion. For context, Amazon’s capex was $83 billion in 2024.
Much of this spending is aimed at expanding data centers and infrastructure to meet skyrocketing demand for AI technology. Amazon’s rivals are similarly ramping up their investments: Meta recently lifted its capital spending forecast to between $66 billion and $72 billion, while Alphabet, Google’s parent company, increased its projected annual spend to $85 billion.
The critical question for investors remains: when will these substantial AI investments translate into meaningful revenue or profit gains?
CEO Andy Jassy hinted at progress, stating that AI efforts have improved Amazon’s “operational efficiency and business growth,” though he stopped short of offering detailed metrics. Previously, Amazon has suggested that generative AI already contributes billions annually to AWS revenue.
During the earnings call, Jassy highlighted Alexa+, an enhanced version of Amazon’s digital assistant launched in early access in late March, as an example of monetizing AI. Alexa+ costs $19.99 per month or is free for Prime members.
“I think over time, you could also imagine, as we keep adding functionality that there could be some sort of subscription element beyond what there is today,” Jassy said. He reiterated that AI development and adoption are still in “very early days.”
While Amazon Web Services remains the leader in cloud infrastructure, its growth is being outpaced by competitors Microsoft Azure and Google Cloud, which reported significantly higher revenue growth in their recent earnings. AWS revenue increased by 18% year-over-year, narrowly beating Wall Street’s estimates but lagging behind Microsoft’s 39% and Alphabet’s 32% cloud growth.
Investors and analysts pressed Amazon management during the call to explain why AWS’s expansion rate is slower than that of its main rivals.
“There is a Wall Street finance person narrative right now that AWS is falling behind in generative AI with concerns about share loss to peers, etcetera,” noted Morgan Stanley analyst Brian Nowak, who maintains an overweight rating on Amazon’s stock.
Similarly, JPMorgan’s Doug Anmuth observed “significantly faster cloud growth among the number two and number three players in the space.”
Jassy acknowledged that sometimes AWS grows faster and other times its competitors do but emphasized AWS’s dominant market position.
“I think the second player is about 65% of the size of AWS,” he said.
Jassy also took a veiled jab at Microsoft by referencing a recent global security breach affecting Microsoft’s SharePoint collaboration software, asserting that AWS customers see a “very big difference” in security.
“You could just look at what’s happened the last couple months, you can just see kind of adventures at some of these players almost every month,” Jassy remarked.
However, these reassurances did not fully convince investors. Bernstein analysts described the company’s tone on competitive positioning as “not great” and its explanations as “less constructive than peers.”
“Words matter…but numbers matter more,” they concluded.
Back in May, Amazon warned investors of potential risks stemming from President Donald Trump’s evolving tariff and trade policies, which at the time imposed a steep 145% tariff on products imported from China. This raised concerns about higher costs for Amazon’s sellers and vendors, potentially leading to price increases and dampened consumer demand.
Since then, the U.S. and China have reached a partial truce, lowering the combined tariff rate on Chinese goods to around 30%.
Amazon’s earnings report suggested that the company is managing these trade tensions better than anticipated. Online store sales grew 11% year-over-year, surpassing analysts’ expectations. Revenue from seller services also outperformed projections. The total number of items sold in both Amazon’s online and physical stores increased by 12%, signaling that consumer demand remains “healthy” despite tariffs and economic uncertainty, according to analysts at Citizens Investment Research.
Amazon’s sales forecast for the third quarter, projecting growth of up to 13%, further implies that “tariffs appear to have been effectively absorbed by suppliers, merchants and customers,” Citizens analysts noted, maintaining an outperform rating on Amazon shares.
Jassy offered a cautiously optimistic view on tariffs during the call, admitting it is “hard to know” how the situation will evolve, especially regarding China.
“We’re unsure at this point who’s going to end up absorbing those higher costs,” he said.
A final trade deal between the U.S. and China is pending, with a deadline set for August 12.
So far, Amazon has weathered the trade war without major disruption.
“We just haven’t seen diminished demand, and we haven’t seen any kind of broad scale [average selling price] increases,” Jassy said. “So that could change in H2. There are a lot of things that we don’t know, but that’s what we’ve seen so far.”
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