Amazon.com, Inc. engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally.
Amazon.com (AMZN) delivered a solid set of second-quarter results, with overall revenue growing 13% year-on-year to USD 167.7 billion, a clear beat against expectations. Its retail and advertising arms showed strong momentum, particularly across online stores, third-party seller services, and subscription revenue. However, it was Amazon Web Services (AWS), the company’s powerhouse cloud division, that cast a shadow over the result, coming in just in line with expectations and trailing the strong growth reported by rivals Microsoft and Google.
For investors watching global tech names, this report tells two stories. On one hand, Amazon is firing on all cylinders in its retail business. On the other hand, the company’s most profitable division, cloud computing, is facing near-term headwinds just as the AI race is heating up globally.
Retail was a clear bright spot this quarter. Online sales grew 11%, while third-party seller services rose by the same margin. Subscription services like Prime continued to gain traction, with revenue up 12%. Advertising was another winner, with a 23% jump in revenue reflecting ongoing demand for Amazon’s sponsored listings. Operating income overall came in at USD 19.2 billion, up 31% from the prior year and ahead of forecasts, helping deliver earnings per share of USD 1.68, well above the expected USD 1.33.
But AWS, which contributes a big chunk of Amazon’s operating income, delivered less impressive results. Revenue grew 17% to USD 30.9 billion, just a touch above estimates, and notably slower than Microsoft Azure’s 39% growth and Google Cloud’s 32%. Investors were particularly disappointed by AWS’s operating margin, which fell by 260 basis points due to higher depreciation and increased stock-based compensation. These margin pressures are expected to persist, with Amazon ramping up capital expenditure to support long-term AI growth. The company spent a record USD 31.4 billion in capex this quarter, almost double from a year ago, and it doesn’t plan to slow down.
CEO Andy Jassy defended the slower AWS growth, attributing it to infrastructure constraints and higher electricity demands for data centres, which are proving to be a major bottleneck in scaling AI capabilities. He also stressed that AWS maintains a leading position in cloud security and availability, suggesting that the market shouldn’t jump to conclusions too early. Still, with rivals pulling ahead and investor expectations running high, patience may wear thin if AWS doesn’t reaccelerate in the quarters ahead.
Looking forward, Amazon guided for third-quarter revenue between USD 174 billion and USD 179.5 billion, slightly ahead of consensus, but its projected operating income range of USD 15.5 billion to USD 20.5 billion was seen as cautious. The midpoint of this guidance, 8.6% to 11.8%, sits slightly below analysts’ expectations, largely due to continued investment in AI infrastructure and tariff-related costs.
While AWS currently looks like a drag on sentiment, there are signs of long-term upside. Cloud contract commitments grew 25% compared to 19% a year ago, suggesting that once infrastructure bottlenecks ease, AWS could regain momentum. Amazon is also continuing to expand into adjacent areas like pharmacy and grocery, although those remain long-term plays and will require time and capital to scale effectively.
For now, AMZN remains a company that is investing heavily in the future. The strong performance in retail and advertising shows the business still has plenty of muscle. However, the underwhelming cloud results, especially in light of booming AI demand, highlight the competitive intensity Amazon faces. The takeaway is nuanced, Amazon still offers compelling
long-term potential, but the near-term ride may be bumpy as it navigates heavy investment cycles, tariff pressures, and increasing rivalry in cloud and AI.
