By Angela Palumbo

Amazon.com's e-commerce business faces the danger that consumers could pull back as tariffs hit the economy, but its cloud business may be hit as well, some analysts say.

Amazon Web Services is a closely watched segment of the company due to its growth. Fourth-quarter revenue at AWS increased 19% from the previous year to $28.8 billion, while sales at the online store increased 7% to $75.6 billion.

Mizuho analyst James Lee expects cloud customers to cut back on spending due to the uncertainty created by President Donald Trump's tariffs. While the cost of cloud services won't be affected by tariffs in the same way as prices of imported goods, customers may need to pull back spending as they feel the impacts of tariffs in other areas of their businesses, he said in a research note.

"Taking the new tariffs into consideration, we expect the percentage of customers to reduce their FY25 budget to increase to 50% as more enterprise decision makers are likely to be hesitant while assessing the economic impact before redeploying their capital," Lee wrote. He cut his price target on Amazon to $255 from $285 while maintaining an Outperform rating on the stock.

Amazon didn't immediately respond to a request for comment.

Investors wouldn't be happy if cloud revenue took a hit. The stock fell 4.1% on Feb. 7 after Amazon reported lower fourth-quarter AWS revenue than expected.

There is also the e-commerce risk to be aware of. Prices in Amazon's online store could rise as tariffs hit. Consumers may choose to pull back their spending on nonessential items in response.

Still, analysts are mostly optimistic. Of the 76 surveyed by FactSet, 71 say the stock is a Buy, five say it is a Hold, and none say to Sell.

"While the 2025 tariffs are unprecedented, and disruption risk is much higher, we would expect Amazon's marketplace to adapt faster than other 1P [first-party] retailers," BofA Securities analyst Justin Post wrote on Wednesday. He also cut his price target on Amazon to $225 from $257 while maintaining a Buy rating. He said that while prices are expected to rise almost everywhere, Amazon is well positioned to keep its prices lower than what the competition offers.

J.P. Morgan analyst Doug Anmuth agrees. He cut his price target on Amazon to $220 from $270 on Tuesday while maintaining an Overweight rating. "Amazon's flexibility in pushing first-party vs. third-party inventory and the Prime membership serve as major advantages in its Stores business," he said in a research note.

Write to Angela Palumbo at angela.palumbo@dowjones.com

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April 09, 2025 13:36 ET (17:36 GMT)

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