Q2 Fiscal 2025 Financial Highlights (Ended June 30, 2025):

• Revenue: A stellar $167.7 billion, representing a 13% increase year-over-year. This comfortably surpassed analyst consensus of approximately $162.1 billion.

• Earnings Per Share (EPS): $1.68, representing a 33% increase year-over-year, a significant beat over the expected $1.32.

• Operating Income: Grew 31% to $19.2 billion.

• Net Income: Increased 35% year-over-year to $18.2 billion.

Diving Deeper: Segment Performance & Analysis

Amazon's quarterly results painted a picture of a company with multiple thriving business segments, each contributing to the overall strength.

• Amazon Web Services (AWS): The cloud computing arm was a key driver, with revenue growing 17.5% year-over-year to $30.9 billion. While this performance was solid, the growth rate was a disappointment to many investors when compared to its key rivals, Microsoft's Azure (which grew 39%) and Google Cloud (which grew 32%). The operating income growth of 9% also lagged, suggesting a margin squeeze due to massive investments in AI infrastructure and data centers. This competitive dynamic was a major reason for the stock's decisive sell-off despite the strong top-line numbers.

• Advertising: This segment was a standout performer, with revenue surging 23% to $15.7 billion. This continues the trend of Amazon's ad business gaining market share and monetizing its vast user data. The higher margins associated with advertising are a significant positive for Amazon's overall profitability.

• North America and International Retail: The core e-commerce business showed continued resilience. North America revenue grew 11% to $100.1 billion, while the International segment saw a dramatic improvement in profitability, with its operating income skyrocketing 448% to $1.5 billion. This indicates that years of investment in international logistics and infrastructure are finally paying off, as these operations achieve greater scale and efficiency.

Management's Strategic Commentary & Outlook

The post-earnings commentary and guidance were the primary catalysts for the negative market reaction.

• AI as a Transformation: CEO Andy Jassy highlighted AI as the "biggest technology transformation of our lifetime" and emphasized that it is being embedded across all parts of Amazon's operations. The company is investing heavily in this space, with plans to increase capital expenditures to over $100 billion in 2025.

• Guidance Uncertainty: While Amazon's Q3 revenue guidance was above analyst estimates, its operating income forecast of a wide range between $15.5 billion and $20.5 billion was a point of investor concern. The midpoint of this range came in below Wall Street's expectation of $19.5 billion. This caution appears to stem from a few key factors, including the enormous, ongoing costs of building out next-generation AI infrastructure.

Bottom Line:

The slower growth rate of AWS compared to the acceleration seen in Microsoft's Azure and Google Cloud, is a valid reason for the stock's negative reactions in after-hours trading. However, as long-term investors, we view this as a good buying opportunity. Amazon's Q2 2025 earnings report was fundamentally strong, demonstrating the company's ability to drive impressive growth and profitability across its key segments.