Amazon reported its 2Q2025 earnings with results that topped Wall Street expectations.
Its revenues climbed to over US$167 billion. This included strong growth by AWS, advertising and its steady retail expansion.
Despite its strong results, shares have fallen over the past month.
In the current AI-driven tech rally, how has Amazon kept the momentum going? Let’s dive in.
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Amazon’s strong 2Q2025 results
In 2Q2025, Amazon reported ~$167 billion in revenue. This was up 8% from last quarter, and up 13% y/y.
While this is below the record high reported in 4Q2024, this beat the company’s expectations, which had a high of $164.0 billion.
Its operating income grew to ~$19 billion, up 4% from last quarter. This is a 30% increase from the $14.7 billion reported 12 months ago.
Considering where Amazon’s results landed a year ago, the growth in operating income is more than 2x the growth in y/y revenue. This is impressive.
Retail remains strong for Amazon
Amazon’s business can be broken into two components. First, retail. And then Amazon’s cloud business, Amazon Web Services (AWS).
The retail segment is further divided by geographical market – the North American and International markets.
Online stores and third party seller-services make up 60% of revenue. Both segments have grown at 10% y/y.
The standout category is actually Advertising. While only ~9% of revenue, it has the highest y/y growth rate of 22% among all the segments. This is even higher than AWS’ 17%.
Meanwhile, AWS generated 53% of the quarter’s operating income – nearly three times its share of the revenue pie.
It was however, the slowest growing segment by operating income. This grew 9% y/y, versus growth for North America 48% and International 448% operating income.
Amazon’s income generating powerhouse – AWS
Amazon’s cloud business, AWS, reported $30.8 billion for 2Q2025 revenue. This grew 5% from the previous quarter and up 17% y/y.
Within the financial quarter, “AI Zones” were inked with countries in the Middle East and Asia. These are namely, the Kingdom of Saudi Arabia and Korea.
New AWS agreements were signed with various new companies. These include the London Stock Exchange, SAP, Airbnb and PepsiCo.
New AWS offerings were also introduced. Most were AI related, with a particular roll-out of agentic AI features. Agentic AI refers to artificial intelligence that is able to make decisions and take actions to meet certain goals.
They require less “step-by-step” instructions. This makes them popular as they need less human input to achieve outcomes.
According to Brian Lisowski, Amazon CFO, both generative AI and non generative AI businesses grew. Operating income stood at $10.2 billion This is at a 33% operating margin.
This is three times that for the North America and International segments, both of which are at ~10% margins.
Advertising – Amazon’s next fast growing segment
We can slice the Amazon revenue pie from another angle. The retail segment can be divided into six other categories.
These include sales from stores, third-party sellers, advertising, subscriptions and other offerings. This is, of course, on top of AWS.
Here’s the breakdown of these segments for 2Q2025:
Online stores and third party seller-services make up 60% of revenue. Both segments have grown at 10% y/y.
The standout category is actually Advertising. While only ~9% of revenue, it has the highest y/y growth rate of 22% among all the segments. This is even higher than AWS’ 17%.
According to Amazon CEO, Andy Jassy, Advertising is an “important contributor to profitability”.
The “full funnel advertising offering” allows advertisers to reach an average ad support audience of more than 300 million in the US alone.
Why did Amazon shares fall after the earnings call?
Post its July 31st earnings call, investors saw Amazon’s stocks drop by 8%, just below US$215 per share. This was despite earnings having beat expectations.
Many analysts have cited AWS’ growth versus that of its close competitors. 17% is a positive growth rate. But it pales in comparison to the over 30% growth rates for Google Cloud and Microsoft Azure.
Moreover, some may also note the shrinked operating margin of 33%. This was down 6%, versus the previous quarter’s 39%. Like their cloud counterparts, AWS sees growing capital expenditures.
Amazon has highlighted that they are investing more in chips and data centers. Earlier in the month, they announced an additional $100 million in investment in their AWS Generative AI Innovation Center.
What’s next?
Amazon expects revenue to rise, between $174 billion to ~$179 billion next quarter. Operational income is expected to land between $15.5 billion to $20.5 billion.
This range includes the current quarter’s income of $19.4 billion. It also includes the 12 months prior income of $17.4 billion for 3Q2024.
It is clear that alike the other tech giants, Amazon will continue to grow its bets on the AI stack. Management has advised that AWS will continue to be the primary driver for their capital expenditure.
AI is being embraced within Amazon’s retail suite too. Within the quarter, they introduced DeepFleet. This is an AI model that has helped Amazon’s one million+ robots travel more efficiently by 10%.
My final thoughts
Amazon generally had a strong quarter. AWS and advertising are growing, which helps the company invest in AI and expand its logistics network. Consumer demand and spending will be important to watch.
There is of course the concern on the uncertain tariffs situation which would impact their retail segment. However, thus far, CEO Andy Jassey has noted that the uncertainty has not changed demand or prices.
While Amazon may not have performed as well as cloud business counterparts, AWS revenue is on an upwards trend.
Overall, Amazon still has room to grow through the rest of 2025, and its investments today could pay off in the future.
