To The Moon

Amazon Earnings Preview: Will AWS Bring a Surprise or a Shock to the Market?

Amazon will announce its FY2025 Q2 earnings report after the market closes on July 31.

Core Financial Indicators

Amazon's revenue is expected to be $162.02B for 2025Q2, up 9.49% YOY;

EPS is estimated to be $1.323, up 5.03% YOY.

Three Things to Watch:

Global Retail Growth

U.S. Bureau of Economic Analysis (BEA) data shows that the growth rate of personal outlays for U.S. residents in the second quarter was roughly the same as in the first quarter, maintaining growth between 2% and 3%. According to Digital Commerce 360's analysis of data from the U.S. Department of Commerce, the e-commerce penetration rate in the U.S. reached a record high of 22.7% in 2024. Since the U.S. Department of Commerce began tracking e-commerce penetration rates in 2000, this ratio has been increasing almost every year. This means that the growth rate of e-commerce sales will also be faster than the overall retail market.

Additionally, last year in the fourth quarter, Amazon launched Amazon Haul, a competitor to Temu, featuring ultra-low prices and free shipping on qualifying orders. Management publicly revealed that the market response was strong. In the second quarter, not only did they launch a web version, but they also expanded into the European market. Although it may still incur losses in the short term, it represents a growth point for its e-commerce business in the future.

Advertising is another fast-growing segment for Amazon. Google's results provided signs of strong demand for online advertising. Amazon’s e-commerce advertising and streaming media advertising will also benefit from this trend.

AWS Business

Amazon's cloud business revenue growth has not fluctuated much in recent quarters. However, its profit margin continues to reach new heights. Last quarter, AWS's operating profit margin was 39.5%, far exceeding the profit margin of less than 10% for its e-commerce business. AWS revenue is expected to see reacceleration from late 2Q due to easing supply constraints. Additionally, Blackwell pricing came online starting June 2025. B200 computing power pricing far exceeds H200, which will contribute additional cloud computing revenue.

Capital Expenditures

In the first quarter of 2025, Amazon's total capital expenditures were approximately $25 billion. The planned capital expenditures for the entire year are as high as $100 billion. In addition to data center expenses, Amazon's low Earth orbit (LEO) satellite broadband network plan, Project Kuiper, is also expected to contribute additional capital expenditures.

Option Market Signals

The put/call ratio for Amazon options is lower than the level during the last earnings season. However, IV (Implied Volatility) data shows that its volatility is as high as 66.19%: in the past year, Amazon's stock price changed by more than 14% twice following the announcement of quarterly earnings results.

Summary of Risks and Opportunities

~Potential Positive Catalysts: Advertising industry recovery; strong demand for cloud services

~Risks to Monitor: macroeconomic slowdown

~Valuation:

Amazon's PE ratio is 37.69 times, which is at the 50th percentile of its historical range over the past five years.

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