31 October 2025
If you are covering Amazon’s Q3 earnings, please find comments below from Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“Amazon reported a solid third quarter last night, with beats across the board. Group operating profit was impacted by some one-off charges (Federal Trade Commission and severance costs) but still came in ahead of expectations. Group revenue grew by 13.4%, outperforming both the upper end of guidance (9.5% to 13%) and the consensus estimate of 11.9%. Operating profit margin came in at 9.7%, or 12% when excluding one-off costs. This compares to guidance of 8.9% to 11.4% and a consensus estimate of 11.1%, which includes those one-off charges.
“This quarter was all about Amazon Web Services (AWS). Revenue was up 20%, ahead of investor expectations, as capacity constraints eased and demand remained strong across both core cloud and AI workloads. AWS regained the lead among hyperscalers in net new cloud dollars added during the quarter (2.1 billion dollars), marking its largest single quarter ever. AWS margins also ticked up quarter-on-quarter, from 33% to 35%.
“Forward commentary on AWS growth was positive. Management noted this is the fastest cloud growth they’ve seen since 2022, with capacity being filled as soon as it comes online. More capacity is still coming: 3.8 gigawatts added in the past 12 months, with plans to add another 1 gigawatt before year-end. All in, AWS is on track to double capacity from 2022 and then double it again by 2027.
“Most surprisingly, management commented that they are sold out of Tranium2 chips – AWS’s own family of AI chips purpose-built for AI training – to a few large customers.
“Retail didn’t get much attention this quarter, but growth remains solid, with North America revenues steady at 11%. Amazon continues to expand its same-day delivery business, which is growing at twice the rate of the overall retail business. The company is also investing in fresh grocery availability for Same Day and expanding into rural markets. North America margins compressed slightly, though excluding one-off charges, the compression would have been more modest.
“International revenue growth slowed but remained healthy at 14% year-over-year, with operating margins effectively flat quarter-on-quarter (excluding one-time severance-related charges).
“Subscription services were up 11%. Prime remains one of Amazon’s key differentiators, offering a sticky subscription with high US household penetration and an increasingly engaging Prime Video library. Advertising revenue was also strong, up 24%.
“Overall, fourth-quarter revenue guidance is stable at 10% to 13% year-over-year, calming fears of a softer retail market. The operating income guide of $21bn to $26bn brackets consensus but leaves room for upside, given recent beats aided by headcount reductions and automation benefits starting to come through.
“Capital expenditure is stepping up in 2025 compared to 2024, and it is expected to rise further in 2026. If this is funding the current acceleration, investors are likely to be supportive. Amazon has been a Magnificent Seven laggard with concerns it was falling behind in AI. Until yesterday, shares were only up a few percent year-to-date, but that changed quickly, with shares rising 13% after hours.”
