To The Moon

$Amazon.com(AMZN)$ reports Q2 2025 earnings on 31 July 2025, after market close. Current Consensus Estimates for Fiscal Q2 2025 (ending June 2025):

EPS (Earnings Per Share): The Zacks Consensus Estimate for EPS is $1.33. This would represent an 8.13% year-over-year growth from $1.23 in Q2 2024. Amazon has a strong track record of beating EPS estimates, having done so for the past four consecutive quarters.

Revenue: The consensus revenue estimate is approximately $162.28 billion. This indicates a projected year-over-year increase of 9.67% from the prior-year quarter's reported figure of $147.98 billion. Amazon's own guidance for Q2 revenue was between $159 billion and $164 billion.

Operating Income: The consensus for operating income is around $16.7 billion, a 13.8% increase YoY, with an expected operating margin of 10.6% (up from 9.9% in Q2 2024). Amazon's guidance for operating income was a wider range of $13.0 billion to $17.5 billion.

Summary of Amazon's Fiscal Q1 2025 Earnings (Ended March 31, 2025)

Amazon reported strong Q1 2025 results, beating analyst expectations on both revenue and earnings per share (EPS).

Net Sales: Increased 9% year-over-year to $155.7 billion (or 10% excluding foreign exchange impacts), surpassing the consensus of around $155.29 billion.

North America Segment: Sales grew 8% year-over-year to $92.9 billion.

International Segment: Sales increased 5% year-over-year to $33.5 billion (or 8% excluding foreign exchange).

AWS Segment: Revenue climbed 17% year-over-year to $29.3 billion, a key highlight demonstrating continued strength in its cloud business.

Operating Income: Rose significantly to $18.4 billion, up 20% from Q1 2024, reflecting improved operational efficiency across segments.

Net Income: Increased to $17.1 billion, or $1.59 per diluted share, comfortably beating the analyst consensus of $1.37.

Despite the strong headline beats, the stock's initial reaction was somewhat muted, even declining slightly in after-hours trading. This was largely attributable to the guidance given for Fiscal Q2 2025.

Lessons Learnt from the Q2 2025 Guidance

Amazon provided the following guidance for Fiscal Q2 2025:

Net Sales: Expected to be between $159.0 billion and $164.0 billion, representing growth of 7% to 11% year-over-year. This midpoint was roughly in line with Wall Street's consensus.

Operating Income: Expected to be between $13.0 billion and $17.5 billion. This range was notably below the analyst consensus that had been built into models, which was closer to the higher end of or even above Amazon's guidance.

The Key Lesson Learned:

The primary lesson from Amazon's Q1 2025 earnings and the subsequent market reaction to its guidance is that while current performance is important, forward-looking guidance often dictates short-term stock price movements more strongly, especially for growth-oriented companies.

Even with robust Q1 results across the board, particularly strong AWS growth and improved profitability, the market chose to focus on the seemingly conservative operating income guidance for Q2. This suggests:

High Expectations for Profitability: Investors have increasingly emphasized profitability and margin expansion for Amazon, especially after years of heavy investment. Any hint of slower margin growth or increased investment that might temper short-term profits can lead to a negative reaction.

AI Investment Impact: While Amazon is heavily investing in AI across AWS and its consumer businesses, the market is scrutinizing how these significant capital expenditures will translate into near-term financial returns. Conservative operating income guidance might signal that these investments are still in a heavy spending phase before they fully translate into profit leverage.

Macroeconomic Caution: The guidance may have also reflected a degree of caution from management regarding the broader macroeconomic environment, potential tariff impacts, or consumer spending trends, leading them to provide a wider or more conservative operating income range.

Q1 2025 report highlighted that for a company like Amazon, "beat-and-raise" is the ideal scenario, meaning beating current quarter estimates and raising future guidance. A beat on the current quarter but with "in-line" or even slightly disappointing guidance (especially on profitability) can lead to a flat or negative stock reaction, as the future outlook carries significant weight.

Key Metrics Investors Should Watch For Amazon Fiscal Q2 2025 Earnings

Amazon Web Services (AWS) Performance:

Growth Rate: AWS is the primary profit driver for Amazon. Investors will be keenly watching its revenue growth rate. While it contributes about 19% of total revenue, it's expected to show strong growth (around 17.4% YoY for Q2). Any deviation from this could significantly impact overall results.

Operating Margin: The profitability of AWS is paramount. Continued margin expansion here is crucial, especially as AI adoption drives demand for cloud infrastructure.

AI Integration and Adoption: Commentary on new AI services, customer traction for AI-related offerings (like Trainium 2 chips for better price performance), and the general outlook for AI's contribution to AWS growth will be highly impactful. CEO Andy Jassy has been bullish on AI's potential for AWS.

Competition: Watch for any insights on how AWS is fending off intensifying competition from Microsoft Azure and Google Cloud, which have been aggressively gaining market share.

E-commerce and Retail Business (North America & International):

Online Store Sales Growth: Despite efforts to diversify, the core e-commerce business remains massive. Investors will assess its growth, especially with factors like Prime Day (which was a four-day event this year) potentially impacting sales.

Third-Party Seller Services and Advertising: These are high-margin segments within retail. Strong growth in these areas, particularly advertising (which has an annualized revenue run rate above $50 billion), is vital for overall profitability.

Delivery Speed and Efficiency: Amazon has been investing heavily in optimizing its fulfillment network and last-mile logistics to reduce costs and improve delivery times. Any commentary on further efficiency gains and cost per unit reduction will be positive.

Profitability of Retail Operations: Beyond just revenue, investors want to see the operating margins of the retail segments improve, signaling successful cost control and leverage of the optimized logistics.

Tariff Impacts: Morningstar points out that tariffs could impact first-party selling, and any discussion on this will be important.

Overall Company Profitability and Free Cash Flow (FCF):

Operating Income and Margin: Beyond segment-specific performance, the overall company operating income and margin will reflect Amazon's ability to drive efficiencies and leverage its scale.

Free Cash Flow: While potentially pressured in the near term by heavy CapEx investments (especially for AWS), a strong FCF generation is a sign of financial health and ability to reinvest or return capital to shareholders.

Guidance for Q3 2025 and Full Year 2025:

This is often the most critical aspect of an earnings report for short-term stock movement. Management's outlook on revenue, operating income, and capital expenditures for the upcoming quarter (Q3) and the remainder of the fiscal year will set market expectations. Any conservative guidance could lead to a sell-off, even if current quarter results are good.

Amazon (AMZN) Price Target

Based on 67 analysts from Tiger Brokers offering 12 month price targets for Amazon in the last 3 months. The average price target is $252.43 with a high forecast of $305.00 and a low forecast of $195.00. The average price target represents a 9.27% change from the last price of $231.01.

Opportunities for Trading Short-Term Post-Earnings:

High Volatility is Expected: Amazon earnings reports are known for causing significant stock price movements. The options market is currently pricing in a movement of roughly 4-5% for the day after the results. This volatility can be a double-edged sword for short-term traders.

Implied Volatility Crush: As the uncertainty of earnings disappears, the implied volatility (and thus option premiums) typically drops sharply.

Option Selling Strategies: For those who believe the stock will move within a certain range, or for long-term holders wanting to generate income, selling options like covered calls (if you own the shares) or cash-secured puts (if you are willing to buy shares at a lower price) before earnings can be a strategy. However, this comes with the risk of missing out on significant upside (for covered calls) or being assigned shares at an undesirable price (for puts) if the stock moves strongly against your expectation.

Directional Plays:

Strong Beat & Positive Guidance: If Amazon delivers a significant beat on both EPS and revenue, particularly with strong AWS growth and optimistic guidance for Q3 and beyond (especially regarding AI momentum), the stock could see a substantial short-term rally. Analysts are overwhelmingly bullish, with many assigning "buy" or "strong buy" ratings and raising price targets, suggesting there's room for upside.

Miss & Weak Guidance: Conversely, a miss on key metrics (especially AWS or advertising growth) or, more critically, disappointing guidance, could lead to a sharp sell-off. Investors were disappointed with Q3 2024 guidance after Q2 2024 earnings, for example.

Technical Levels: Watch key technical levels. A break above resistance (e.g., around $233, and then potentially $242.5 which was February's high) on positive news could signal further upside. Conversely, a fall below support (e.g., near $213.4, the lower Bollinger Band boundary) could indicate a deeper pullback.

Analyst Reactions: Post-earnings analyst upgrades or downgrades will further influence short-term price action.

Technical Analysis - Exponential Moving Average (EMA)

Amazon short-term price action will not matter. I do not see any possibility of Amazon breaking their highs before earnings, there is an expected move of at least 4.57% by Friday after their earnings.

If Amazon report good earnings, I am expecting them to create an upside to a new all-time highs, the bulls are already in control and they will just continue on the daily uptrend. But we need to watch the resistance that the bulls try to push through.

With the current positive momentum, we might see Amazon creating a new price breakout if the earnings beat expectations and also a stronger guidance given.

Important Considerations for Short-Term Traders:

Risk Management is Crucial: Earnings trades are inherently risky due to the binary nature of the event. Use strict risk management, including proper position sizing and stop-loss orders.

Earnings History: Amazon has consistently beaten EPS estimates in recent quarters, but guidance has sometimes been a point of concern. Pay close attention to management's tone and forward-looking statements.

Macroeconomic Environment: The broader economic climate and consumer spending trends will also play a role in how Amazon's results are perceived.

Summary

Amazon's Q2 2025 earnings will be a defining moment. Investors should prioritize AWS's performance, overall profitability, efficiency improvements in retail, and especially the guidance for Q3. For short-term traders, the impending volatility offers opportunities, but careful strategizing and risk management are paramount.

Despite beating estimates, AMZN stock fell slightly post-earnings due to a cautious Q2 2025 revenue and operating income guidance. Key investor focus remains on AWS growth, AI investments, e-commerce profitability, and overall free cash flow. Short-term trading opportunities depend on market reaction to future guidance and specific segment performance.

Key metrics to watch: AWS cloud growth (expected ~17.4% YoY), e-commerce profitability (online sales, advertising, third-party services), and Q3 guidance. Focus on AI contributions and operational efficiency.

Short-term trading: Expect high volatility (~4-5% move priced in). Opportunities exist for directional plays (up on strong AWS/guidance, down on miss/weak outlook) or option selling strategies due to implied volatility crush. Risk management is crucial.

I am holding Amazon for long-term, but I think Amazon might create another new highs if they could beat expectations and gave a stronger outlook guidance.

Appreciate if you could share your thoughts in the comment section whether you think Amazon would be to beat earnings expectations and also provide a positive guidance.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.