Amazon Q1 2025 Earnings Prep

Key Points

• Analysts expect an EPS of $1.37 and revenue of approximately $155.08 billion.
• Tariffs and declining consumer sentiment may affect Amazon's costs and sales.
• Recent reports on pausing datacenter leases hint at AWS growth decelerating.
• A weaker U.S. dollar may offset the $2.1B forex hit factored into the Q4 2024 guidance.

Amazon will report its first-quarter earnings after the market close on Thursday, May 1, 2025. The analysts' consensus calls for EPS of $1.37, up from $0.98 reported in the same quarter last year. The Street's revenue consensus is roughly $155.08 billion.

Amazon significantly reduced its Q1 2025 guidance when it reported its Q4 2024 earnings on February 6th, 2025. Here is a reminder of the guidance:

• Net sales are expected to be between $151.0 billion and $155.5 billion, or to grow between 5% and 9% compared with first quarter 2024. This guidance anticipates an unusually large, unfavorable impact of approximately $2.1 billion, or 150 basis points, from foreign exchange rates. Also, as a reminder, in first quarter 2024 the impact from Leap Year added approximately $1.5 billion in net sales.

• Operating income is expected to be between $14.0 billion and $18.0 billion, compared with $15.3 billion in first quarter 2024.

• This guidance assumes, among other things, that no additional business acquisitions, restructurings, or legal settlements are concluded.

Here are some key areas to watch in the upcoming report.

Tariffs and Amazon's China Exposure

The Trump administration's tariffs on Chinese goods has once more added complexity to Amazon's cost structure and supply chain. Amazon's huge third-party (3P) marketplace — estimated to represent about 65% of the company's gross merchandise volume (GMV) — is closely linked to Chinese sellers.

In response to the tariffs, Amazon has already cancelled orders from a number of Chinese suppliers in a bid to defend margins. But that could result in product shortages and logistical bottlenecks. While Amazon's size should enable it to secure more advantageous supplier terms, the ripple effect on both first-party and third-party ecosystems could be profound and ultimately push consumer prices higher.

Relief as Dollar Weakens

Amazon's global presence exposes it to foreign exchange pressures. For Q4 2024, the firm reported a $900 million negative impact due to the strength of the U.S. dollar. With international markets accounting for nearly 23% of Amazon's total revenue, the company stated that its Q1 2025 guidance factors in a $2.1 billion headwind from foreign exchange rates.

U.S. Dollar Index (DXY) is down 8.2% year-to-date — predominantly due to tariffs, investor avoidance of U.S. assets, and increasing recession concerns. The downtrend in the DXY began when the Trump administration announced tariffs on February 2nd and has continued through to the present. We believe that the forex pressures factored into Amazon's conservative guidance will likely be surpassed in the upcoming earnings due to the significant weakening of the US dollar against major foreign currencies.

US Dollar Index (DXY) year-to-Date chart indicating a downtrend since early February, source: marketwatch DXY chart

Consumer Sentiment Weakness

U.S. consumer confidence continues to decline, adding another layer of complexity. The University of Michigan's Consumer Sentiment Index plummeted to 52.2 in April from 57.0 in March, the lowest level since mid-2022. Consumers are citing rising prices, concerns over job security, and uncertainty around tariffs and economic growth as key factors behind the decline in sentiment.

University of Michigan's Consumer Sentiment Index: Last 10 Years Chart, source: UMich surveys of consumers

For Amazon, which depends on discretionary spending to fuel its business, weaker consumer sentiment could dampen sales, particularly in higher-margin categories like electronics, home goods, and luxury items.

AWS Growth Trajectory

Wall Street expects Amazon Web Services to report low double-digit revenue growth in Q1 2025, marking a slowdown from its historic growth rate of 30% to 40%. AWS remains a crucial component of the business, with operating margins exceeding 25%, far surpassing those of Amazon's core retail operations.

Competition with Microsoft Azure and Google Cloud is intensifying, particularly as companies become increasingly sensitive to costs and shift towards hybrid cloud solutions. Investors will closely monitor AWS margins — any compression in margins would raise concerns about Amazon's operating leverage and its ability to cross-subsidize other business units.

Wells Fargo recently released a note stating that Amazon has halted its datacenter lease signings, which signals a potential cutback in Amazon's cloud growth. Amazon's upcoming earnings call will provide more clarity on this potential cutback.

CNBC: Pressure on AI trade amid reports Amazon pausing datacenter leases

Retail Advertising Spend

Amazon's ad business brought in $56.2 billion in 2024, accounting for about 8.8% of overall net sales of $638 billion. While concerns have been raised about decreased ad spend during economic uncertainty, Google's latest earnings indicate that ad spending is holding up — an encouraging early indicator of Amazon's ad segment performance this quarter.

According to WSJ, the stock’s average target price is $248.71. Stay tuned to our Mag 7 coverage for more updates.