• Amazon is set to release its Q2 2025 financial results on July 31 after the US market closes.

• Analysts expect Meta's Q2 revenue to be $162.08 billion, up 9.5% year-on-year.

• Earnings per share is expected to grow 5% YoY to $1.32. Net income is expected to be $14.23 billion, up 5.5% from a year earlier, according to Bloomberg's unanimous expectations.

Three Things to Watch in 2Q

Al, Tariffs Crimp Amazon Margin; Long Run Intact

Amazon.com's long-term growth potential is intact, with market-share gains across each vertical. Margin can also expand, yet faces near-term hurdles from capital spending to support Al investments and higher costs from tariffs.

In retail, the push for speed, convenience and value are pivotal to maintain the lead and drive continued double-digit ad revenue gains. Improving IT budgets and companies’ greater wilingness to shift infrastructure to the public cloud remain catalysts for AWS. A push for pharmacy and grocery are large undertakings that we'll monitor closely.

AWS Cloud Business Faces Intensifying Competition

AWS remains crucial to the company's profitability, contributing 19% of total revenue. The cloud division is expected to grow 17.4% YoY in Q2.

However, AWS faces mounting pressure from competitors. Microsoft's Azure and Google Cloud have been aggressively pursuing market share, reducing AWS's dominance from 33% in Q1 2022 to 29% in Q1 2025.

The company announced redundancies in AWS last week, alongside plans for further workforce reductions over the coming years. Management believes artificial intelligence can automate many current tasks, supporting Amazon's key strategy of expanding AWS operating margins to improve overall company profitability.

AWS achieved a record operating margin of 39.5% in Q1. Investors will scrutinise whether this level can be maintained whilst fending off competitive pressure from rivals.

Trade Policy Uncertainty Creates Headwinds

Amazon faces significant challenges from evolving trade policies. The e-commerce giant sources products globally while generating 60% of revenue from North America, making it vulnerable to tariff changes.

Management highlighted 'substantial uncertainty' from trade policies in the previous earnings call. Investors will seek clarity on how Amazon plans to navigate these challenges.

Higher tariffs create a difficult choice for Amazon. Absorbing costs would damage margins, while passing them to consumers could reduce purchasing power and sales.

The complexity of constantly changing trade rules also increases administrative burden. Amazon must continually adjust pricing strategies and supply chain management to remain compliant yet competitive.

Analysts’ Opinions

Deutsche Bank analyst Lee Horowitz wrote that while tariff concerns were front and center when Amazonguided for Q2, a resilient consumer backdrop and tariff-related cost increases that continue to get kicked down the road should support upside to Q2-Q3 numbers. "What has become abundantly clear is that in the absence of Temu and Shein, Amazon share gains have accelerated," he highlighted. The firm also expects to see AWS revenue accelerate in the second half of the year.

Needham boosted its estimates on Amazon ahead of the earnings report. Analyst Laura Martin also believes the peak tariff woe is in the rear-view mirror and pointed to the record Prime Day results. Crucially, Martin pointed out that GenAI is lowering costs structurally in AMZN's logistics infrastructure and improving its automation efficiency.

Citi backed its bullish view on Amazon. Analyst Ronald Josey and his team expect the e-commerce giant to beat revenue and operating income expectations. "Given continued efficiency gains across the FC network, cost discipline overall, and mix-shift to high-margin ad revenue and AWS, we look for continued margin expansion," highlighted Josey.