Analyst(s): Olivier Blanchard, Brad Shimmin
Publication Date: August 5, 2025
Amazon’s latest earnings reflect strong momentum across retail, advertising, and subscriptions, offset by narrowing AWS margins and a cautious profit outlook. While AI initiatives span Alexa, robotics, and Bedrock, cloud growth lagged peers, prompting questions on AWS’s competitiveness.
What is Covered in this Article:
- Amazon’s Q2 FY 2025 financial results
- AWS growth trends, margin pressure, and infrastructure constraints
- Retail and advertising execution, delivery efficiency, and margin expansion
- Updates on Amazon’s generative AI portfolio, product launches, and developer traction
- Q3 FY 2025 revenue and operating income guidance
The News: Amazon.com, Inc. (NASDAQ: AMZN) reported its Q2 FY 2025 results, with revenue of $167.7 billion, up 13% year-on-year (YoY) and 12% YoY excluding currency impact, beating the consensus estimate of $162.15 billion. Amazon Web Services (AWS) revenue increased 17.5% YoY to $30.9 billion, in line with consensus estimates of $30.8 billion. North America and International segment revenues rose 11% and 16% YoY to $100.1 billion and $36.8 billion, respectively. Advertising revenue climbed 22% YoY to $15.7 billion. Operating income reached $19.2 billion, up 31% YoY and above the $17.0 billion consensus, with an operating margin of 11.4% (Q2 FY 2024: 9.9%). Net income grew 35% YoY to $18.2 billion, translating to diluted earnings per share (EPS) of $1.68 (Q2 FY 2024: $1.26), ahead of the $1.33 consensus.
“Our conviction that AI will change every customer experience is starting to play out as we’ve expanded Alexa+ to millions of customers, continue to see our shopping agent used by many millions of customers, launched AI models like DeepFleet that optimize productivity paths for our 1M+ robots, made it much easier for software developers to write code with Kiro (our new agentic IDE), launched Strands to make it easier to build AI agents, and released Bedrock AgentCore to enable agents to be operated securely and scalably,” said Andy Jassy, President and CEO of Amazon. “Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I’m excited for what lies ahead.”
Amazon Q2 FY 2025 Revenue Tops View; Profit Outlook Disappoints Street
Analyst Take: Amazon delivered a solid Q2 with strong execution across retail, advertising, and subscription services, but cloud momentum lagged versus peers and raised investor concerns. While AWS growth aligned with consensus, margin contraction and a cautious profit outlook tempered enthusiasm. Capex expansion, tariff pressures, and investor concerns around AWS’s slower growth and margin compression suggest that near-term profitability may remain under pressure as Amazon plays a longer game on infrastructure and AI leadership. Nevertheless, signals from customer adoption, product rollouts, and signed agreements suggest a growing foundation across AWS, Alexa+, and generative AI tools.
AWS: In-Line Growth, Margin Pressure, and Capacity Constraints
AWS revenue grew 17.5% YoY to $30.9 billion, meeting expectations, but failed to impress amid stronger cloud results from Microsoft (+39% YoY) and Google (32% YoY), particularly given ongoing investments in generative AI.
AWS operating margin declined from 39.5% in Q1 FY 2025 to 32.9% in Q2 FY 2025, with management attributing roughly half the sequential drop to seasonal stock-based compensation. The remainder came from rising depreciation tied to AI infrastructure investments and FX headwinds.
The AWS backlog stood at $195 billion, up 25% YoY, signaling healthy forward demand, though constrained supply—especially power—continues to limit revenue realization.
CEO Andy Jassy reiterated that demand continues to outstrip capacity and that resolution may take several quarters. This dynamic highlights AWS’s longer-term strength and its current exposure to infrastructure bottlenecks, particularly as hyperscaler peers push harder in AI workloads.
Retail, Ads, and Fulfillment Execution
Amazon’s core retail and ads engine performed well in the quarter, with strong unit growth, improving delivery speeds, and expanding brand selection. Topline growth was supported by 11% YoY growth in North America to $100.1 billion and 16% YoY internationally to $36.8 billion. Advertising climbed 22% YoY to $15.7 billion, driven by increased retail traffic and strong advertiser demand across Amazon’s DSP, retail media, and streaming properties, including Prime Video, Twitch, and Fire TV.
Improvements in fulfillment efficiency were notable: the share of direct lanes rose 40% YoY, average package travel distance dropped 12%, and handling touches fell 15%. Unit volume rose 12% YoY, but outbound shipping cost growth was contained at 6%, highlighting operational leverage. Same- and next-day delivery is now live in 1,000+ small US towns, with a target of 4,000+ by year-end. At the same time, segment-level profitability improved, with North America operating margin expanding 190 basis points (bps) YoY to 7.5%, and International margin rising 320 bps YoY to 4.1%. These gains highlight Amazon’s strong execution across consumer businesses and ability to drive efficiency while scaling reach and engagement.
AI Progress Broad but Still in Investment Mode
Amazon outlined broad momentum across its AI portfolio, but most initiatives remain in early stages with monetization yet to scale. AWS highlighted strong demand for Bedrock and proprietary models like Nova, which became the second-most-used model on the platform. New product launches included AgentCore, Trainium2-backed EC2 instances, and Strands – a framework for building agents – which saw 300,000+ downloads. Amazon also introduced Kiro, its integrated development environment designed to support natural language coding with dynamic agent hooks. Developer interest is high, with over 100,000 users in the first five days.
The company believes its deeper integration with enterprise workloads and custom silicon like Trainium2 will drive future competitiveness, but acknowledged that inference cost will ultimately become the dominant spend driver – and Amazon is positioning accordingly. Meanwhile, capital expenditures reached $31.4 billion in the quarter, a record high, and are expected to remain elevated in H2 FY 2025 as Amazon builds out AI infrastructure across cloud and retail.
The quarter also marked the expansion of Alexa+ Early Access to millions of customers. This affirms a move to integrate more advanced AI capabilities into the Alexa platform and consequently deliver more functionality to Amazon’s growing ecosystem of Alexa-enabled devices. The company is very well-positioned to leverage the next wave of natural language AI assistants and agents through its seamless integration of devices and services. Improvements in Alexa functionality and UX should help drive both the frequency and the quality of user interactions with the platform, and in turn drive more interactions with retail and other increasingly AI-enabled Amazon business segments. We believe that AI-enabled devices like Fire TV, Echo, Alexa speakers, and others, paired with increasingly human-like Alexa features and enhanced utility, will help Amazon drive subscription, services, and retail revenue.
Guidance and Final Thoughts
Amazon’s Q3 FY 2025 revenue guidance of $174.0-179.5 billion (consensus: $173.2 billion) implies 10-13% YoY growth and includes a 130 bps FX tailwind. The operating income forecast of $15.5-20.5 billion (consensus: $19.42 billion) contributed to the post-earnings stock pullback, with the wide range reflecting caution amid ongoing trade uncertainty and intensifying AI competition. While retail, ads, and subscriptions continue to perform strongly, near-term pressure from cloud margins and constrained AI infrastructure may persist. Nonetheless, the 25% YoY growth in AWS commitments and broad product traction and ecosystem engagement positions Amazon well to accelerate into FY 2026 as supply normalizes and AI adoption matures.
See the full press release on Amazon’s Q2 FY 2025 financial results on the Amazon website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
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Author Information
Olivier Blanchard is Research Director, Intelligent Devices. He covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
Brad Shimmin is Vice President and Practice Lead, Data Intelligence, Analytics, & Infrastructure at Futurum. He provides strategic direction and market analysis to help organizations maximize their investments in data and analytics. Currently, Brad is focused on helping companies establish an AI-first data strategy.
With over 30 years of experience in enterprise IT and emerging technologies, Brad is a distinguished thought leader specializing in data, analytics, artificial intelligence, and enterprise software development. Consulting with Fortune 100 vendors, Brad specializes in industry thought leadership, worldwide market analysis, client development, and strategic advisory services.
Brad earned his Bachelor of Arts from Utah State University, where he graduated Magna Cum Laude. Brad lives in Longmeadow, MA, with his beautiful wife and far too many LEGO sets.
