Amazon outlines $174B–$179.5B Q3 sales target while expanding AI and delivery capabilities

Earnings Call Insights: Amazon.com, Inc. (AMZN) Q2 2025

Management View

Andy Jassy, CEO, highlighted $167.7 billion in revenue, up 12% year-over-year, and operating income of $19.2 billion, up 31% year-over-year. He noted, “We saw good progress across our various customer experiences and businesses this past quarter.” Jassy emphasized enhanced product selection, including the return of Nike to Amazon’s retail store, new premium brands, and the expansion of the Perishables Pilot. He reported strong customer adoption for perishables, with “75% of customers who viewed as service this year are first-time shoppers for perishables on Amazon, with 20% of customers who use the service returning multiple times within their first month.”
Jassy called out Amazon’s record Prime Day, citing “record sales, number of items sold and number of prime sign-ups in the 3 weeks leading up to the Prime Day.”
Delivery speed improvements were underscored, with Jassy stating, “In Q2, we increased the share of orders moving through direct lanes…by over 40% year-over-year. We’ve also reduced the average distance packages traveled by 12% and lowered handling touches per unit by nearly 15%.” He announced plans to expand same-day and next-day delivery to “tens of millions of U.S. customers and more than 4,000 smaller cities, towns and rural communities by the end of the year.”
Automation and robotics milestones included the deployment of the “1 millionth robot” and the rollout of DeepFleet, which “improves robot travel efficiency by 10%.”
Amazon Ads generated $15.7 billion in revenue, up 22% year-over-year, and Jassy described notable partnerships with Roku and Disney.
AWS growth was highlighted at 17.5% year-over-year with a $123 billion annualized revenue run rate. Jassy noted, “AWS continues to build a large fast-growing triple-digit year-over-year percentage multibillion-dollar business with more demand than we have supplied for at the moment.” He also detailed new AI, chip, and application launches, including Trainium2 and Kiro.
Jassy reported the Alexa+ rollout to “millions of customers,” positive feedback, and continued expansion. He also referenced Project Kuiper’s progress and Amazon Pharmacy’s 50% year-over-year growth.
CFO Brian Olsavsky stated, “Worldwide revenue was $167.7 billion, a 12% increase year-over-year, excluding the impact of foreign exchange. Foreign exchange had a $1.5 billion favorable impact to revenue in the quarter.” He noted North America revenue at $100.1 billion and International at $36.8 billion, both up 11% year-over-year. Olsavsky highlighted a “worldwide third-party seller unit mix was 62%, the highest ever.”

Outlook

Olsavsky provided Q3 guidance: “Q3 net sales are expected to be between $174 billion and $179.5 billion.” He estimated a “favorable impact of approximately 130 basis points” from foreign exchange. Operating income guidance was set at “$15.5 billion to $20.5 billion.”
Management did not offer segment-specific outlook, but emphasized focus on customer value, product selection, competitive prices, and unmatched convenience.

Financial Results

Revenue for Q2 was $167.7 billion, a 12% year-over-year increase. Operating income reached $19.2 billion, and trailing 12-month free cash flow was $18.2 billion.
North America segment reported $100.1 billion in revenue and $7.5 billion in operating income, with a 7.5% operating margin, up 190 basis points year-over-year.
International segment revenue was $36.8 billion with $1.5 billion in operating income and a 4.1% operating margin, up 320 basis points year-over-year.
AWS revenue for the quarter stood at $30.9 billion, with $10.2 billion in operating income. Olsavsky noted, “AWS segment margins decline from a record high of 39.5% in Q1 to 32.9% in Q2,” citing seasonal stock-based compensation and higher depreciation as primary drivers.
Advertising revenue rose 22% to $15.7 billion. Capital expenditures reached $31.4 billion in Q2.

Q&A

Douglas Till Anmuth, JPMorgan: Asked about tariff absorption and AWS growth relative to peers. Jassy responded that it is hard to predict tariff impacts: “We just don’t know what’s going to happen moving forward.” On AWS, he emphasized, “We have a pretty significant advantage…in security,” and said, “We have more demand than we have capacity right now.”
Mark Stephen F. Mahaney, Evercore: Inquired about AWS backlog and supply constraints. Dave Fildes confirmed “backlog figures…at June 30, that was $195 billion, so that’s up about 25% year-over-year.” Jassy said, “I don’t believe that we will have fully resolved the amount of capacity we need for the amount of demand that we have in a couple of quarters. I think it will take several quarters.”
Colin Alan Sebastian, Baird: Asked about international segment efficiency and Project Kuiper. Olsavsky explained, “Operating margin was up 320 basis points year-over-year to 4.1%… continuation of a strong progression…over the last 10 quarters.” Jassy described Kuiper as having “pretty meaningful differentiation here in performance” and noted delays with rocket providers.
Brian Thomas Nowak, Morgan Stanley: Raised questions about AWS GenAI leadership and future acceleration. Jassy maintained, “I really like the inputs and the set of services that we’re building in the AI space today. Customers really like them and it’s resonating with them. I still think it’s very early days in AI and in terms of adoption.”
Ronald Victor Josey, Citi: Queried Amazon’s internal GenAI use. Jassy stated, “AI is the biggest technology transformation for a lifetime…we are going to embrace it. We’re going to try and shape it.”
Justin Post, Bank of America: Asked about Q3 revenue guidance. Olsavsky answered, “We’ve guided to $174 billion to $179.5 billion…we feel really good about the key inputs we control.”

Sentiment Analysis

Analysts pressed on tariffs, AWS growth versus peers, GenAI strategy, and international profitability, displaying a slightly skeptical tone, particularly around tariff impacts and AWS competitive positioning.
Management’s tone was confident in prepared remarks, citing record achievements and robust demand, but more measured and cautious in Q&A, especially when addressing tariffs, AWS supply constraints, and GenAI competition. Phrases like “We just don’t know what’s going to happen,” and “I don’t believe that we will have fully resolved the amount of capacity we need…in a couple of quarters,” reflected prudent caution.
Compared to the previous quarter, management’s confidence in AI and cloud prospects remains, but current Q&A responses showed slightly increased caution regarding supply and macro uncertainties, while analysts’ skepticism on AWS share and tariffs persisted.

Quarter-over-Quarter Comparison

Q2 guidance for net sales ($174B–$179.5B) is above the Q1 guidance for Q2 ($159B–$164B), signaling expected acceleration. Operating income guidance is also higher for Q3 ($15.5B–$20.5B) vs. Q2’s prior range.
AWS revenue growth rose from $29.3B (Q1) to $30.9B (Q2). The AWS backlog increased from $189B to $195B. However, AWS margins dropped to 32.9% from a record 39.5% in Q1, mainly due to stock-based compensation and depreciation, compared to high Q1 profitability.
North America and International segments both saw margin improvements versus Q1. International margin gain of 320 basis points year-over-year continued a multi-quarter positive trend.
Management’s tone in both quarters was confident but grew more cautious around supply, tariffs, and GenAI competition in Q2. Analyst focus continued to center on AWS growth, margin sustainability, international efficiency, and supply chain.

Risks and Concerns

Tariff impacts remain unpredictable, with management repeatedly noting the uncertainty and lack of visibility on who will absorb future costs.
AWS supply constraints, especially power and chip availability, continue to limit growth. Management stated, “We have more demand than we have capacity at this point.”
Margin headwinds in AWS from compensation expenses and depreciation were highlighted as expected to fluctuate further.
Project Kuiper faces launch timing risks due to rocket provider delays.
Analyst concerns focused on tariffs, AWS competitive dynamics, and macroeconomic volatility.

Final Takeaway

Amazon’s Q2 2025 call underscored strong revenue growth, expanding margins in core retail and international segments, as well as robust momentum in advertising and AWS. While management cited ongoing progress in speed, selection, and automation, significant attention was paid to unpredictable tariff impacts and AWS supply constraints. Q3 sales are expected in the $174B–$179.5B range, supported by continued investment in AI, robotics, and delivery infrastructure. Management indicated confidence in long-term opportunities, but acknowledged near-term uncertainties in tariffs and infrastructure capacity, especially within AWS. The company remains focused on driving customer value, operational efficiency, and expanding its presence in key growth areas such as AI, advertising, and global logistics.

Read the full Earnings Call Transcript