MW Amazon could emerge stronger from tariffs. But earnings will show how much pain that requires.

By Emily Bary

Amazon reports earnings on Thursday, and investors will be focused on the outlook for signs of tariff-related pressure

Over the long run, tariff-related disruptions could make Amazon.com Inc. even more entrenched in American commerce. But in the short term, there could be some pain for investors.

That's the backdrop for Amazon's $(AMZN)$ first-quarter earnings report, which is due out after the close of trading on Thursday.

It's hard not to expect some "demand destruction" at Amazon, according to UBS analyst Stephen Ju. The question is how much.

See also: Amazon says it won't show how tariffs are impacting prices. Why that's a good sign.

One thing that's not so much of a worry for Amazon investors is the end of the "de minimis" exemption, which let businesses import parcels worth under $800 into the U.S. without facing tariffs.

"While there may be a significant number of sellers shipping goods just under the $800 limit, we believe that they ultimately accounted for a small or mid-single-digit percent of GMV," or gross merchandise volume, Ju wrote.

In fact, Amazon could end up benefiting as Temu and Shein, Chinese competitors that more heavily relied on the "de minimis" exemption, have to raise prices or scale back their push into the U.S.

"Although Amazon Haul will also feel the impact of nullifying the 'de minimis' exemption, we believe the net result will be positive for Amazon and its peers," Monness, Crespi, Hardt & Co. analyst Brian White wrote.

The bigger problem for Amazon could be around general purchasing, with the UBS team estimating that at least half of what's sold on Amazon could face price adjustments due to tariff costs. "Consumers therefore might have to make more difficult choices on where to allocate their dollars," Ju wrote.

The good news, analysts say, is that Amazon might emerge from this period stronger. "Retail revenue growth and margins both contracted five years ago during the last China tariff hike, and again in the inflation-led slowdown in 2022," Bernstein analyst Mark Shmulik wrote. "In both of these instances, Amazon's [e-commerce] market share and retail margins not only recovered, but improved post-macro shock."

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The bad news is that investors might need to reset their growth expectations for the year. UBS's Ju now expects 8% growth in U.S. volumes this year, versus his prior estimate of 10.4%.

The pain might not show up right away. For instance, Evercore ISI analyst Mark Mahaney sees first-quarter consensus estimates as "reasonable." Those call for $155 billion in revenue and $1.37 in earnings per share, though Mahaney himself is expecting $154 billion in revenue and $1.39 in earnings per share.

He has a similar view around the second quarter, noting that consensus estimates call for 5% sequential growth in revenue and a 11.2% operating margin. Those seem reasonable to him as well.

"That said, we are becoming incrementally cautious, given clearly softening consumer sentiment and uncertainty around tariff impacts," Mahaney wrote.

BofA's Post is a bit more wary about the second-quarter guidance, however, noting that Amazon's management could take a conservative view of things. Post expects a second-quarter revenue forecast of $154 billion to $160 billion, while the FactSet consensus is for $161 billion. Tariffs will be the biggest focus of Amazon's call, he added.

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Then there's Amazon's cloud-computing business. Growth at Amazon Web Services is projected to have slowed to 17.6% from 18.9% in the fourth quarter.

Investors will be looking to gauge the general health of cloud spending now, as well as how Amazon is benefiting from the artificial-intelligence rush. Plus there are questions about how the cloud business would fare if economic conditions worsen. Post, for his part, is fairly confident.

"Looking forward, we think AWS's cost-effective options (particularly for AI) position the company well if there were pullback in corporate spend," he wrote.

Investors should listen for commentary about AWS's relative cost efficiencies on the earnings call.

-Emily Bary

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April 30, 2025 07:30 ET (11:30 GMT)

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