2 May 2025
If you are covering Amazon’s latest financial results, please find below a comment from Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“Amazon’s sales came in line with expectations, but still towards the higher end of the guided range. AWS and the strength it has in advertising continues to drive the beating of expectations in the operating margin for the group. Revenues in North America were up 8%, which represents somewhat of a slowdown, but this is understandable given the last quarter of the year is typically higher due to the holiday season.
“AWS revenues grew 17%, and met consensus, however, after Microsoft Azure’s numbers this week, this may not look as impressive. Net new dollars were weaker than Azure but better than Google. Management shared that they are seeing growth coming from both their generative AI business and non-generative AI offerings, as migrations to the cloud are necessary in order to deploy AI initiatives. Supply constraints (chips, motherboard) remain, which are expected to improve throughout the year.
“Being a proxy for the health of the US consumer, the forecast for the second quarter was an even bigger focus last night. The company guided revenue growth between 7% and 11%, basically bracketed expectations, with encouraging noises that Amazon is seeing no changes to demand as a result of tariffs. Product pricing has also remained mostly stable and advertising dollars are keeping pace so far. But let’s not forget just how defensive Amazon’s product mix skews, with everyday essentials growing twice as fast as the rest of its items, and is also responsible for one in every three products sold in the US.
“Operating income guidance was a bit disappointing, ($13-17.5bn) which was wider than normal, and the top-end was below consensus estimates. There are various scenarios baked into guidance e.g. if higher margin advertising services falls, which is the first to go if conditions deteriorate, or if Amazon absorbs some product costs due to tariff impacts, so the conservatism is understandable.
“So near term, there is likely to be some volatility for Amazon as it grapples with the new world of tariffs we find ourselves in. However, over the long-term, Amazon remains a winner with management confirming that the company tends to take share in market shocks.”
