Key takeaways
View moreAmazon's current valuation appears moderately undervalued considering its strong financial performance, market leadership, and growth prospects in AI and cloud computing. The company's EV/EBITDA ratio is below the industry average, suggesting potential undervaluation, while its high profitability metrics and strategic investments in growth areas are not fully reflected in the current stock price. However, regulatory risks and competitive pressures in the cloud sector warrant caution.
- Amazon's profitability metrics, including gross margin (50.55%) and net profit margin (11.00%) for the quarter ending March 31, 2025, significantly exceed industry averages, indicating efficient operations.
- The company's liquidity position, as indicated by the current ratio (1.05) and quick ratio (0.84) as of March 31, 2025, is relatively weak compared to the industry average, requiring close monitoring.
- Amazon's capital structure is conservative, with a debt-to-equity ratio of 49.21% as of March 31, 2025, providing financial flexibility for future investments.
- Recent news highlights that Amazon's Q1 2025 earnings exceeded expectations, with EPS of $1.59, a 40.7% increase year-over-year, driven by advertising and overall revenue growth.
- AWS revenue missed expectations for the third consecutive quarter, growing 17% year-over-year to $29.3 billion, indicating increasing competition in the cloud sector.
- Amazon is strategically investing in AI and expanding its rural delivery network with a $4 billion investment, aiming to deliver over a billion packages annually by 2026 and create 100,000 jobs.
- Market sentiment is mixed, with analysts expressing concerns about the impact of tariffs on Amazon's margins and consumer spending, but many maintain a positive outlook, citing Amazon's diversified business model and long-term growth prospects.
- Free cash flow to equity was -$8.00 billion for the quarter ending March 31, 2025, compared to $17.80 billion for the quarter ending December 31, 2024, raising concerns about cash generation relative to capital spending.
- Amazon's Q2 revenue guidance is between $159 billion and $164 billion, slightly below analyst expectations, leading to a cautious outlook.
- Jeff Bezos plans to sell up to 25 million shares of Amazon stock, valued at approximately $4.75 billion, which could potentially impact investor sentiment.
Evaluation summary
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Company Overview:
- Amazon.com, Inc. (AMZN) is a multinational technology company primarily known for its online retail shopping services. It operates through three main segments: North America, International, and Amazon Web Services (AWS).
- The North America and International segments focus on retail sales of consumer products, advertising, and subscription services through online and physical stores. AWS provides cloud computing services to startups, enterprises, government agencies, and academic institutions.
- Key products and services include online retail, cloud computing, digital content, advertising, and subscription services like Amazon Prime. The company's revenue is diversified across these segments, with AWS being a significant contributor.
- For comparative analysis, the company is benchmarked against the Consumer Discretionary Select Sector SPDR Fund (XLY) and compared to industry peers Alphabet, Inc. (GOOGL) and Meta Platforms, Inc. (META).
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Financial Performance:
- Amazon's financial performance shows consistent revenue growth. For the quarter ending March 31, 2025, revenue was $155.67 billion, compared to $187.79 billion for the quarter ending December 31, 2024.
- Gross profit margin for the quarter ending March 31, 2025, was 50.55%, an increase from 47.34% in the previous quarter. Net profit margin was 11.00%, up from 10.65% in the previous quarter.
- Net income for the quarter ending March 31, 2025, was $17.13 billion, compared to $20.00 billion for the quarter ending December 31, 2024.
- Return on Assets (ROA) for the quarter ending March 31, 2025, was 11.23%, Return on Equity (ROE) was 25.24%, and Return on Invested Capital (ROIC) was 16.68%. These are significantly higher than the industry averages of -6.02%, -479.17%, and -8.41%, respectively.
- Recent news indicates that Amazon's Q1 2025 earnings exceeded expectations, with EPS of $1.59, a 40.7% increase year-over-year. However, AWS revenue missed expectations for the third consecutive quarter, growing 17% year-over-year to $29.3 billion.
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Operational Efficiency:
- Total assets increased from $554.82 billion as of June 30, 2024, to $643.26 billion as of March 31, 2025. Total liabilities also increased from $318.37 billion to $337.39 billion during the same period.
- Working capital decreased from $15.14 billion as of June 30, 2024, to $8.47 billion as of March 31, 2025.
- Net operating cash flow was $17.02 billion for the quarter ending March 31, 2025, compared to $45.64 billion for the quarter ending December 31, 2024. Net investing cash flow was -$29.80 billion, and net financing cash flow was -$0.05 billion for the same period.
- Free cash flow to equity was -$8.00 billion for the quarter ending March 31, 2025, compared to $17.80 billion for the quarter ending December 31, 2024. The free cash flow margin was -0.05 for the quarter ending March 31, 2025.
- Total capital expenditure was $25.02 billion for the quarter ending March 31, 2025, while depreciation, depletion, and amortization were $14.26 billion.
- The company did not pay any cash dividends.
- The current ratio was 1.05 as of March 31, 2025, lower than the industry average of 1.61. The quick ratio was 0.84, also lower than the industry average of 1.23.
- The debt-to-equity ratio was 49.21% as of March 31, 2025, lower than the industry average of 105.91%.
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Growth Opportunities:
- Amazon is expanding its rural delivery network with a $4 billion investment, aiming to deliver over a billion packages annually by 2026 and create 100,000 jobs.
- The company launched its first batch of Kuiper satellites, marking a significant step in its internet connectivity project.
- Amazon is investing heavily in AI across various applications and in AWS, including custom silicon like Trainium.
- The company is expanding its presence in emerging markets, particularly India, through investments in Amazon Pay and broader infrastructure development.
- Amazon is strategically investing in AI and cloud infrastructure, with plans for $100 billion in capital expenditures and the development of over 1,000 generative AI applications.
- The company's capital allocation strategies are aligned with its growth objectives, focusing on investments in infrastructure, technology, and strategic partnerships.
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Recent Developments and Market Sentiment:
- Amazon reported Q1 2025 revenue of $155.7 billion, exceeding estimates, and EPS of $1.59, a 40.7% increase year-over-year. AWS revenue grew 17% year-over-year to $29.3 billion, although this missed expectations for the third consecutive quarter.
- Amazon's advertising revenue increased by 19% year-over-year to $13.92 billion, outperforming analyst expectations.
- Amazon's Q2 revenue guidance is between $159 billion and $164 billion, slightly below analyst expectations, leading to a cautious outlook.
- The overall market sentiment regarding Amazon is mixed. While the company reported strong Q1 earnings that exceeded expectations, concerns about tariffs and competitive pressures in the cloud sector have tempered investor enthusiasm.
- Analysts remain generally bullish, with several maintaining high price targets, but cautious guidance for the upcoming quarter has led to some uncertainty.
- Jeff Bezos plans to sell up to 25 million shares of Amazon stock, valued at approximately $4.75 billion.
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Risks and Threats:
- Intense competition from physical, e-commerce, and omnichannel retailers, cloud service providers, digital content companies, and other technology firms.
- Risks related to international operations, including regulatory/trade restrictions and reliance on China-based suppliers.
- Variability in retail demand and ability to manage fulfillment network and inventory.
- Exposure to fraudulent or unlawful activities by third-party sellers.
- Protecting intellectual property rights and defending against infringement claims.
- Cybersecurity threats and system interruptions.
- Regulatory changes and legal/tax controversies, including ongoing antitrust investigations and lawsuits related to pricing, competition, and consumer protection.
- Proposed tariffs could increase costs for Amazon's first-party business and impact consumer spending.
- Amazon Music is facing a lawsuit alleging shadowbanning, which could impact its reputation and artist relations.
- Project Kuiper is facing production delays, needing to ramp up satellite production to meet government deadlines.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio is 15.82 as of March 31, 2025, lower than the industry average of 24.57. The Enterprise Value to Sales ratio is 3.24, higher than the industry average of 1.57.
- Analysts suggest Amazon's stock is undervalued and could see significant gains following Q1 results, with price targets ranging from $220 to $288.
- Potential catalysts include strong performance in advertising and overall revenue growth, as well as successful investments in AI and cloud infrastructure.
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Price Performance:
- Amazon's stock price has fluctuated between $167.32 and $205.71 from March 7, 2025, to May 2, 2025.
- The stock closed at $189.98 on May 2, 2025.
- Compared to peers, Amazon has shown mixed performance. Over the past year, AMZN has outperformed GOOGL but significantly underperformed META. Specifically, AMZN's 1-year return is 0.68%, while GOOGL's is -1.95% and META's is 28.67%.
- Recent price movements have been influenced by news events and market sentiment, including the release of Q1 2025 earnings and concerns about tariffs.
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Future Outlook:
- For Q2 2025, Amazon expects net sales between $159 billion and $164 billion, with a foreign exchange headwind of approximately 10 basis points. Operating income is projected to be between $13 billion and $17.5 billion, including the impact of the seasonal step-up in stock-based compensation expense.
- Analysts expect Amazon to grow earnings by an average of 20% annually in the long term, supported by its leadership in e-commerce and cloud markets.
- Recent news and developments, such as investments in AI and expansion of the rural delivery network, are expected to drive future growth.
- Management expressed optimism about the company's progress and innovation, particularly in AI and customer experience.
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Summary:
- Amazon demonstrates strong profitability and revenue growth, driven by its diversified business segments. However, liquidity remains a concern, and free cash flow generation has been inconsistent.
- Strengths: Strong brand recognition, diversified business model, leadership in e-commerce and cloud computing, and significant investments in AI.
- Weaknesses: Relatively weak liquidity position, inconsistent free cash flow generation, and increasing competition in the cloud sector.
- Opportunities: Expansion of rural delivery network, growth in emerging markets, and potential for AI to drive future revenue and market share gains.
- Threats: Intense competition, regulatory scrutiny, macroeconomic factors, and potential impacts from tariffs.
- Amazon's overall financial health is stable, supported by its strong earnings and conservative capital structure. However, the company needs to address its liquidity concerns and improve free cash flow generation.
- Critical factors for future performance include successful investments in AI, effective management of the fulfillment network, and mitigation of risks related to tariffs and competition.
- Areas requiring further monitoring include the current ratio, free cash flow margin, and AWS revenue growth.
- Amazon's investment profile is characterized by high growth potential balanced against identified risks. The company's position relative to industry trends and recent developments suggests that it is well-positioned for long-term success, but investors should closely monitor its liquidity and cash flow generation. Potential catalysts include strong performance in advertising and overall revenue growth, while headwinds include increasing competition and regulatory scrutiny.
Price history
Fundamentals
Insights
- Amazon demonstrates strong profitability, with net profit margins and EBITDA margins significantly exceeding industry averages.
- The company's liquidity position, as indicated by the current and quick ratios, is relatively weak compared to its peers, requiring close monitoring.
- Amazon's capital structure is conservative, with a low debt-to-equity ratio, providing financial flexibility for future investments.
- The company's growth rate is decelerating, as evidenced by the lower 3-year CAGR compared to the 5-year CAGR for revenue and other key metrics.
- Amazon's cash flow generation has been inconsistent, with a negative free cash flow margin in the most recent quarter, raising concerns about its ability to fund future growth.
Analysis
- Revenue
- Revenue has shown consistent growth, driven by Amazon's diverse business segments.
- The growth rate is decelerating, as indicated by the lower 3-year CAGR compared to the 5-year CAGR.
- Sales and revenue are trending upwards, but are only slightly above the 8-quarter average.
- Profitability
- Profitability metrics, including gross margin, operating margin, and net margin, are strong and improving.
- Net profit margin and EBITDA margin are significantly higher than the industry average, reflecting efficient operations.
- The company has demonstrated an ability to control costs and improve operational efficiency.
- Liquidity
- Liquidity ratios, such as the current ratio and quick ratio, are below the industry average, indicating a need to monitor short-term obligations.
- The current ratio is trending slightly downward, suggesting a potential weakening of short-term liquidity.
- Working capital has experienced high volatility, which could pose challenges for short-term financial management.
- Solvency
- Solvency ratios, such as the debt-to-equity ratio and debt-to-EBITDA ratio, are healthy and trending downward, indicating a conservative capital structure.
- The company relies on a mix of debt and equity, with a growing equity base.
- The debt to EBITDA ratio is much lower than the industry average, indicating a strong ability to cover debt with earnings.
- Operational Efficiency
- Amazon demonstrates efficient inventory management, as reflected in stable inventory levels.
- The company's investments in infrastructure and technology have driven growth in fixed assets.
- Tangible other assets have shown substantial growth, potentially related to strategic investments or acquisitions.
- Cash Flow Analysis - Net income growth has been a primary driver of operating cash flow. - Increased capital expenditure reflects Amazon's expansion of its fulfillment network and cloud infrastructure. - The free cash flow margin has been negative in the most recent quarter, raising concerns about cash generation relative to capital spending.
- Risk Factors
- The relatively low current ratio compared to the industry average warrants attention.
- Fluctuations in working capital could pose challenges for short-term financial management.
- The negative free cash flow margin in the most recent quarter raises concerns about cash generation relative to capital spending.
- Future Outlook
- Continued investments in infrastructure and technology are expected to drive further growth in fixed assets.
- Monitoring the current ratio and managing short-term liabilities will be crucial to maintaining financial flexibility.
- Growth in equity is projected to continue, supported by strong earnings and profitability.
- Profitability
Financial statements
Public filings
- Amazon continues to solidify its position as a dominant player in e-commerce, cloud computing, and digital content, but faces intensifying competition across its business lines
- Significant investments in technology, fulfillment, and new initiatives like satellite networks and autonomous vehicles position the company for future growth, but also introduce operational complexity and risk
- Regulatory scrutiny, legal challenges, and global macroeconomic conditions pose substantial risks that could materially impact Amazon's financial performance and operations
- Effective management of the company's vast fulfillment network, inventory, and supplier relationships is critical to maintaining profitability and customer satisfaction
- Amazon's diversified business model and strong cash flow generation provide financial flexibility, but also expose the company to a wide range of risks that require careful monitoring and mitigation
Core Business and Operations:
- Amazon.com, Inc. is a leading e-commerce, cloud computing, and digital content company that operates globally
- Key business segments include North America (online/physical retail, advertising, subscription services), International (online retail, advertising, subscription services), and Amazon Web Services (cloud computing services)
- Serves a diverse customer base including consumers, sellers, developers, enterprises, content creators, and advertisers
- Faces intense competition from physical, e-commerce, and omnichannel retailers, cloud service providers, digital content companies, and other technology firms
Industry and Market Trends:
- Rapid growth of e-commerce, cloud computing, and digital content consumption driving industry trends
- Increasing competition, technological innovation, and regulatory scrutiny in the company's key markets
- Macroeconomic factors like inflation, interest rates, and global economic/geopolitical conditions can significantly impact demand and operations
Recent Events:
- Continued expansion of product/service offerings and global footprint
- Significant investments in technology infrastructure, fulfillment network, and new initiatives (e.g. satellite network, autonomous vehicles)
- Leadership changes, including new CEO of Amazon Web Services
Risk Factors:
- Intense competition and ability to successfully expand into new products, services, and geographies
- Risks related to international operations, including regulatory/trade restrictions and reliance on China-based suppliers
- Variability in retail demand and ability to manage fulfillment network and inventory
- Exposure to fraudulent or unlawful activities by third-party sellers
- Protecting intellectual property rights and defending against infringement claims
- Cybersecurity threats and system interruptions
- Regulatory changes and legal/tax controversies
Legal Matters:
- Ongoing antitrust investigations and lawsuits related to pricing, competition, and consumer protection
- Patent infringement lawsuits, including a $525 million jury award against Amazon
- Data privacy and security investigations, including a €746 million fine from Luxembourg regulators
Management's Discussion and Analysis:
- Strong revenue growth across all segments, driven by increased unit sales, advertising, and subscription services
- Profitability improvements through operational efficiencies, though offset by investments in technology, fulfillment, and new initiatives
- Significant capital expenditures to expand fulfillment network and cloud infrastructure
- Healthy cash flow generation and liquidity, though increased borrowing and interest rate exposure
- Exposure to foreign exchange rate fluctuations impacting reported results
Earnings calls
Earnings Report 2025Q1 (2025-05-01)
Key takeaways
- AI is a significant growth driver for AWS: The company's aggressive investment in AI and the rapid growth of its AI-related services indicate a substantial opportunity for future revenue and market share gains.
- Tariff uncertainty presents both risks and opportunities: While tariffs could negatively impact consumer spending and profitability, Amazon's broad selection, diverse seller base, and proactive inventory management may allow it to weather the storm better than competitors.
- AWS remains a key profit center: Despite ongoing investments in infrastructure and AI, AWS continues to generate strong margins, highlighting its efficiency and competitive advantage in the cloud computing market.
- Fulfillment network optimization is crucial for cost management: Amazon's efforts to improve its fulfillment network, including regionalization and automation, are essential for reducing costs and improving delivery speeds, which are critical for maintaining customer satisfaction and competitiveness.
- Alexa+ represents a strategic shift towards action-oriented AI agents: The introduction of Alexa+ signals a move towards more sophisticated and practical AI applications, potentially driving increased user engagement and revenue opportunities.
Focus of management’s prepared remarks
- Stores Business Performance: Strong consumer resonance driven by selection, value, and shipping speed. Welcomed new brands and offered luxury assortments.
- Pricing Strategy: Focused on keeping prices low, especially during uncertain economic times, with deal events worldwide saving customers over $500 million.
- Fulfillment Network Optimization: Significant progress in making the fulfillment network more efficient and cost-effective through regionalization and a redesigned inbound architecture.
- Delivery Speed Records: Achieved fastest delivery speeds ever for Prime members globally, with more same-day and next-day deliveries than any previous quarter.
- Tariff Impact Mitigation: Discussed potential impacts of heightened tariffs, noting forward buying and advanced inbounding by third-party sellers. Highlighted Amazon's broad selection and ability to weather challenging conditions.
- Everyday Essentials Growth: Everyday Essentials grew more than twice as fast as the rest of the business, representing one out of every three units sold in the U.S.
- Amazon Ads Growth: Strong growth in Amazon Ads, generating $13.9 billion in revenue, up 19% year-over-year, driven by full-funnel advertising offerings.
- AWS Growth and AI Investment: AWS grew 17% year-over-year, with a $117 billion annualized revenue run rate. Aggressive investment in AI across Amazon and in AWS building blocks for external and internal builders.
- AI Building Blocks: Described the AI stack, including Trainium 2 for model building, Amazon Bedrock for generative AI apps, and Amazon Nova for action-oriented agents.
- Alexa+ Introduction: Introduced Alexa+, a next-generation personal assistant with enhanced intelligence and action capabilities, available with Prime or for a monthly fee.
- Project Kuiper Milestone: Project Kuiper reached a significant milestone with the launch of its first satellite into orbit, with service expected to begin later this year.
Focus of the analyst Q&A
- AWS and AI Capacity:
- Supply/demand imbalance for AI workloads and the timeline for AWS to capture enough AI revenue to drive acceleration.
- The impact of P5 GPU instances and Trainium 2 instances on supporting AI workloads.
- Strategic Positioning Amid Trade Uncertainty:
- How the company is positioning itself for the medium term given uncertainty about the global trade environment.
- Key strategic priorities and investment prioritization in the face of potential trade shifts.
- AWS Revenue Fluctuations:
- Reasons for potential fluctuations in AWS revenues beyond capacity constraints.
- Comparison of AWS growth rates to competitors and the factors influencing these differences.
- AWS Margin Performance:
- Drivers behind the strong AWS margin performance.
- Expectations for normalized AWS margins going forward.
- Alexa and User Behavior:
- Strategies for shifting user behavior with Alexa to leverage more complex tasks.
- Retail Operations and Inventory Management:
- Key operational areas of focus to ensure smooth execution during Prime Day, Thanksgiving, and the holiday season, especially with tariff uncertainty.
- Thoughtful inventory management to balance supply and demand.
- Q2 EBIT Guidance:
- Potential one-time or tariff-related costs included in the Q2 EBIT guidance.
- AWS Backlog and Enterprise Migration:
- Update on the AWS backlog number.
- Perspective on enterprise migration to the cloud, including any confusion caused by AI and the timing of the transition.
Summary
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Financial Performance
Amazon reported Q1 2025 revenue of $165.7 billion, a 10% increase year-over-year excluding foreign exchange impacts. Operating income was $18.4 billion, up 20% year-over-year. Trailing twelve-month free cash flow reached $25.9 billion. Net income for Q1 was $17.1 billion, including a $3.3 billion pre-tax gain from the investment in Anthropic. The company exceeded the high end of its operating income guidance range by approximately $400 million.
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Revenue Drivers
Growth was driven by strong consumer engagement in the stores business, particularly in selection, value, and shipping speed. Amazon Ads contributed significantly with 19% year-over-year growth, generating $13.9 billion in revenue. AWS grew 17% year-over-year, reaching an annualized revenue run rate of $117 billion. Everyday Essentials grew more than twice as fast as the rest of the business and represented one out of every three units sold in the U.S.
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Profit Margins and Cost Management
North America segment operating income was $5.8 billion (6.3% margin), and International segment operating income was $1 billion (3% margin). These margins were impacted by one-time charges related to historical customer returns and costs to receive inventory pulled forward ahead of anticipated tariffs. Excluding these charges, North America and International operating margins would have been 7.2% and 3.7%, respectively. AWS operating income was $11.5 billion. Cost management initiatives include fine-tuning the inbound network, building out same-day delivery sites, expanding the rural delivery network, and adding robotics and automation.
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Guidance and Outlook
For Q2 2025, Amazon expects net sales between $159 billion and $164 billion, with a foreign exchange headwind of approximately 10 basis points. Operating income is projected to be between $13 billion and $17.5 billion, including the impact of the seasonal step-up in stock-based compensation expense. The company is closely monitoring the macroeconomic environment, including the impact of tariffs, and planning for various outcomes.
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Strategic Initiatives
Key initiatives include regionalizing the fulfillment network, redesigning the inbound architecture, and expanding same-day delivery sites and rural delivery networks. Amazon is investing heavily in AI across various applications and in AWS, including custom silicon like Trainium. Project Kuiper reached a milestone with the launch of its first satellite into orbit. The company is also expanding its advertising capabilities and investing in long-term opportunities.
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Management Commentary
Management expressed optimism about the company's progress and innovation, particularly in AI and customer experience. They emphasized the importance of broad selection, low prices, and speedy delivery. The CEO highlighted the potential of AWS to become an even larger business due to AI. Management acknowledged the uncertainty surrounding tariffs but expressed confidence in Amazon's ability to navigate challenging conditions.
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Industry and Market Conditions
Management noted that over 85% of global IT spend is still on-premises, indicating significant growth potential for cloud services. They acknowledged the competitive landscape in cloud computing but emphasized AWS's larger base and continued growth. The company is closely monitoring macroeconomic conditions, including potential impacts from tariffs and consumer spending.
News evaluation
Sentiment rating:Mixed
May 05, 2025Summary
The overall sentiment regarding Amazon.com, Inc. (AMZN) is mixed. While the company reported strong Q1 earnings that exceeded expectations, concerns about tariffs and competitive pressures in the cloud sector have tempered investor enthusiasm. Analysts remain generally bullish, with several maintaining high price targets, but cautious guidance for the upcoming quarter has led to some uncertainty. Additionally, Amazon's ongoing investments in AI and operational improvements are viewed positively, suggesting potential for future growth despite current challenges.
Key takeways
Amazon's Q1 2025 earnings exceeded expectations, driven by strong performance in advertising and overall revenue growth, but AWS revenue missed expectations for the third consecutive quarter.
Amazon is strategically investing in AI and expanding its rural delivery network to drive future growth, but faces challenges from tariffs and increasing competition in the cloud sector.
Despite strong earnings, cautious guidance for Q2 and concerns about tariff impacts have tempered investor enthusiasm, leading to a mixed sentiment regarding Amazon's near-term prospects.
News
Amazon reported Q1 2025 revenue of $155.7 billion, exceeding estimates, and EPS of $1.59, a 40.7% increase year-over-year.
AWS revenue grew 17% year-over-year to $29.3 billion, although this missed expectations for the third consecutive quarter.
Amazon's advertising revenue increased by 19% year-over-year to $13.92 billion, outperforming analyst expectations, demonstrating strength in its advertising segment.
Amazon's Q2 revenue guidance is between $159 billion and $164 billion, slightly below analyst expectations, leading to a cautious outlook.
Amazon is investing $4 billion to expand its rural delivery network, aiming to deliver over a billion packages annually by 2026 and create 100,000 jobs.
Jeff Bezos plans to sell up to 25 million shares of Amazon stock, valued at approximately $4.75 billion.
Amazon launched its first batch of Kuiper satellites, marking a significant step in its internet connectivity project.
Amazon is overhauling its compensation model to reward high performers, potentially boosting employee morale and productivity.
Amazon recorded one-time charges of approximately $1 billion due to unresolved customer returns and costs related to inventory pulled forward to avoid tariffs.
Analysis
Analysts express concerns about the impact of tariffs on Amazon's margins and consumer spending, which could affect future profitability.
Despite tariff concerns, analysts maintain a positive outlook on Amazon, with many rating it as a strong buy, citing its diversified business model and long-term growth prospects.
Analysts suggest Amazon's stock is undervalued and could see significant gains following Q1 results, with price targets ranging from $220 to $288.
Analysts believe Amazon's investments in AI will pay off in the long term, enhancing its market position and driving earnings growth.
Analysts expect Amazon to grow earnings by an average of 20% annually in the long term, supported by its leadership in e-commerce and cloud markets.
Analysts note that Amazon has not seen material impact from tariffs yet, aided by pre-buying inventory, but the long-term effects remain a concern.
Analysts suggest that current uncertainty surrounding Amazon's stock may present a buying opportunity for long-term investors, given its strong fundamentals and growth potential.
Analysts expect strong demand for cloud services and AI to mitigate tariff impacts on Amazon, with AWS positioned as a key growth driver.
Trends
Amazon is strategically investing in AI and cloud infrastructure to drive future growth, with plans for $100 billion in capital expenditures and the development of over 1,000 generative AI applications.
Amazon is expanding its presence in emerging markets, particularly India, through investments in Amazon Pay and broader infrastructure development, indicating a focus on long-term global growth.
Amazon is facing increasing competition in the cloud sector, with AWS growth lagging behind competitors like Microsoft and Alphabet, necessitating continued innovation and strategic partnerships.
Risk factors
Proposed tariffs could increase costs for Amazon's first-party business and impact consumer spending, potentially reducing competitive pricing pressures but also leading to higher prices on its platform.
Amazon Music is facing a lawsuit alleging shadowbanning, which could impact its reputation and artist relations, potentially affecting its competitive position in the music streaming market.
Project Kuiper is facing production delays, needing to ramp up satellite production to meet government deadlines, which could impact its ability to compete in the satellite internet market.
Comparative analysis
Benchmarks (as of 2025-04-28)
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Performance Comparison:
- The provided data does not include performance data for Amazon.com, Inc. (AMZN). Therefore, it is not possible to directly compare AMZN's historical performance to the Consumer Discretionary Select Sector SPDR Fund (XLY). However, the data shows that XLY experienced a YTD performance of -10.47%, a 1-year performance of 10.79%, a 2-year performance of 37.28%, and a 3-year performance of 24.65%. Without AMZN's performance data, it's impossible to determine periods of outperformance or underperformance relative to XLY.
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Risk and Return Analysis:
- The data does not include annualized returns for AMZN, so a direct comparison to XLY is not possible. XLY's annualized returns were 10.79% over 1 year, 17.17% over 2 years, and 7.62% over 3 years.
- AMZN generally exhibited higher annualized volatility compared to XLY throughout the observed period. For example, in Q2 2022, AMZN's volatility ranged from 53.51 to 68.42, while XLY's ranged from 33.21 to 48.63. This indicates that AMZN's price experienced larger fluctuations than XLY.
- The maximum drawdown for AMZN was -56.15% on 2022-12-28, while for XLY it was -39.67% on the same date. This suggests that AMZN is riskier, as it experienced a more significant decline from its peak compared to XLY.
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Risk-Adjusted Performance:
- The Sharpe ratios for both AMZN and XLY were negative in early periods but improved significantly starting in Q2 2023. However, without specific Sharpe ratio values for AMZN, it is difficult to definitively state whether AMZN offered a better risk-adjusted return compared to XLY.
- The beta values for both AMZN and XLY have consistently remained above 1, indicating that both are more volatile than the market. AMZN's beta is generally higher than XLY's, suggesting that AMZN is more sensitive to market movements.
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Overall Assessment:
- Based on the available data, AMZN appears to be a riskier investment compared to the Consumer Discretionary Select Sector SPDR Fund (XLY). AMZN exhibited higher volatility and a larger maximum drawdown. The Sharpe ratios for both improved over time, but without specific values for AMZN, a direct comparison of risk-adjusted returns is not possible. The consistently higher beta of AMZN suggests that it is more sensitive to market movements than XLY. Investors should consider their risk tolerance and investment objectives when deciding whether to invest in AMZN versus a broader consumer discretionary fund like XLY.
Peers Price History(as of 2025-05-02)
- Performance Comparison:
- Amazon.com, Inc. (AMZN) has shown mixed performance compared to Alphabet, Inc. (GOOGL) and Meta Platforms, Inc. (META). Over the past year, AMZN has outperformed GOOGL but significantly underperformed META. Specifically, AMZN's 1-year return is 0.68%, while GOOGL's is -1.95% and META's is 28.67%. Over longer periods (2 and 3 years), AMZN has outperformed GOOGL but significantly underperformed META. For example, over 3 years, AMZN's return is 63.2%, GOOGL's is 41.46%, and META's is 187.99%. Recently, AMZN has underperformed both GOOGL and META YTD.
- Risk and Return Analysis:
- The annualized returns show that AMZN has provided lower returns than META over 1, 2, and 3-year periods but higher returns than GOOGL. For instance, the 3-year annualized return for AMZN is 17.74%, compared to 12.26% for GOOGL and 42.27% for META.
- In terms of annualized volatility, META has generally been more volatile than AMZN and GOOGL. In the most recent period, Q2 2025, AMZN's volatility is 59.62%, GOOGL's is 45.53%, and META's is 68.15%.
- The maximum drawdown for AMZN was -56.15% on 12/28/2022, compared to -44.32% for GOOGL on 11/03/2022 and -76.74% for META on 11/03/2022. This indicates that AMZN's risk profile is higher than GOOGL's but lower than META's.
- Risk-Adjusted Performance:
- META generally exhibits higher Sharpe Ratios, indicating better risk-adjusted returns compared to AMZN and GOOGL. GOOGL tends to have a slightly higher Sharpe Ratio than AMZN in many periods, suggesting a more efficient risk-return profile.
- The Beta values for AMZN, GOOGL, and META have generally remained above 1 throughout the analyzed period, indicating that these stocks are more volatile than the market.
- Overall Assessment:
- AMZN has shown mixed performance compared to its peers. While it has outperformed GOOGL in certain periods, it has consistently underperformed META, which has demonstrated higher returns and Sharpe Ratios. AMZN's risk profile, as indicated by its volatility and drawdown, is moderate compared to GOOGL (lower risk) and META (higher risk).
- A significant trend is the increasing Sharpe Ratios for all three companies from Q2 2022 to Q1 2024, indicating improving risk-adjusted returns. However, from Q2 2024 to Q2 2025, the Sharpe ratios for all three companies generally decreased, indicating decreasing risk-adjusted returns.
Peers Fundamentals(as of 2025-03-31)
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Market Position and Size:
- Amazon.com, Inc. (AMZN) leads its peer group with the largest market capitalization at 2016143.75, surpassing Alphabet, Inc. (GOOGL) at 1990504.05 and Meta Platforms, Inc. (META) at 1507039.68.
- AMZN's revenue of 650313 million is significantly higher than GOOGL's 359314 million and META's 170359 million, demonstrating its strong market presence.
- Despite its revenue dominance, AMZN's EBITDA of 127907 million is slightly less than GOOGL's 133510 million, but greater than META's 89284 million. Its net income of 65944 million is less than GOOGL's 110996 million and approximately equal to META's 66635 million.
- AMZN's superior revenue and market capitalization establish its dominant position within the peer group, despite lower profitability metrics compared to GOOGL and META.
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Profitability and Efficiency:
- AMZN's Gross Profit Margin of 49.16% is greater than the industry average of 43.69%, but less than GOOGL's 58.54% and META's 81.75%.
- AMZN's EBITDA Margin of 19.67% is significantly greater than the industry average of 2.03%, but less than GOOGL's 37.16% and META's 52.41%.
- AMZN's Net Profit Margin of 10.14% is significantly greater than the industry average of -4.63%, but less than GOOGL's 30.89% and META's 39.11%.
- Despite its size, AMZN's profitability margins are lower than its peers, suggesting higher operating costs or a strategic focus on revenue growth over immediate profits.
- AMZN's Return on Average Assets of 11.23%, Return on Average Total Equity of 25.24%, Return on Average Total Capital of 17.92%, and Return On Average Invested Capital of 16.68% are all significantly greater than the industry averages, but less than GOOGL and META.
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Financial Health and Stability:
- AMZN's Current Ratio of 1.05 and Quick Ratio of 0.84 are less than GOOGL's 1.77 and META's 2.66, as well as the industry averages of 1.61 and 1.23, respectively, indicating lower liquidity.
- AMZN's Total Debt to Total Equity Ratio of 49.21 is greater than GOOGL's 8.25 and META's 26.76, but less than the industry average of 105.91, suggesting a higher reliance on debt financing compared to its peers.
- AMZN's Debt / EBITDA of 0.42 is greater than GOOGL's 0.1 and META's 0.32, but less than the industry average of 3.71, indicating manageable debt levels relative to its earnings.
- AMZN's financial health is stable, but its lower liquidity and higher debt levels compared to peers warrant monitoring.
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Valuation and Market Perception:
- AMZN's Enterprise Value To Sales of 3.24 is greater than the industry average of 1.57, but less than GOOGL's 5.1 and META's 8.64.
- AMZN's Enterprise Value To EBITDA of 15.82 is less than META's 16.25 and the industry average of 24.57, but greater than GOOGL's 13.63.
- AMZN's Price To Earnings of 30.99 is greater than GOOGL's 18.29 and META's 23.29, but less than the industry average of 84.68.
- AMZN's Price to Book Ratio of 7.71 is greater than GOOGL's 5.77 and the industry average of 5.29, but less than META's 8.14.
- AMZN's Price To Sales Ratio of 3.15 is greater than the industry average of 1.56, but less than GOOGL's 5.61 and META's 9.08.
- AMZN's Price to Free Cash Flow is 96.88, which is significantly greater than GOOGL's 26.58 and META's 28.81, and the industry average of -5.72.
- AMZN's valuation metrics suggest that the market perceives it as a growth company with high future potential, as reflected in its higher Price to Earnings and Price to Free Cash Flow ratios compared to its peers.
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Cash Flow and Capital Management:
- AMZN's Net Operating Cash Flow of 113903 million is less than GOOGL's 132601 million, but greater than META's 96108 million.
- AMZN's Total Capital Expenditure of 93093 million is greater than GOOGL's 57720 million and META's 43797 million, indicating significant investments in growth initiatives.
- AMZN's Free Cash Flow of 20810 million is less than GOOGL's 74881 million and META's 52311 million, potentially due to its higher capital expenditures.
- AMZN's cash flow generation is lower than its peers, reflecting its focus on reinvesting in growth opportunities.
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Growth and Future Prospect:
- AMZN shows consistently higher growth in EBITDA and EBIT Margin compared to the peer group average, indicating improved operational efficiency and cost management.
- AMZN shows consistently lower growth in Sales/Revenue, Net Income, Basic Earnings per Share, and Free Cash Flow compared to the peer group average, suggesting potential challenges in revenue generation and bottom-line performance.
- AMZN's 3-year CAGR is greater than its 5-year CAGR for EBITDA, Net Income, Basic Earnings per Share, and EBIT Margin, while the peer group shows the opposite trend, suggesting that AMZN's growth in these metrics has accelerated in recent years compared to the peer group.
- AMZN's future prospects are tied to its ability to sustain its growth in profitability metrics while addressing its challenges in revenue and cash flow generation.
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Potential for Investment:
- AMZN presents a mixed investment profile, with its dominant market position and high growth potential offset by lower profitability and cash flow compared to peers.
- AMZN's higher valuation metrics suggest that investors are willing to pay a premium for its future earnings potential, but its higher debt levels and lower liquidity ratios warrant caution.
- AMZN may be an attractive investment for growth-oriented investors who are willing to accept lower current profitability in exchange for future growth, but value investors may prefer its more profitable peers.
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Key Risks and Considerations:
- AMZN's lower profitability margins compared to peers pose a risk to its long-term earnings potential.
- AMZN's higher debt levels and lower liquidity ratios could limit its financial flexibility and increase its vulnerability to economic downturns.
- AMZN's reliance on continued revenue growth to justify its high valuation metrics creates a risk if its growth slows down.
- Increased competition in the e-commerce and cloud computing markets could erode AMZN's market share and profitability.
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Overall Assessment:
- AMZN is a dominant player in the e-commerce and cloud computing markets, with a strong market position and high growth potential.
- However, its lower profitability and cash flow compared to peers, as well as its higher debt levels and lower liquidity ratios, raise concerns about its long-term financial health.
- AMZN's high valuation metrics suggest that investors have high expectations for its future growth, but its ability to meet those expectations is uncertain.
- Overall, AMZN is a high-risk, high-reward investment opportunity that requires careful monitoring of its financial performance and competitive landscape.