From Nasdaq: 2025-05-08 15:00:00

Amazon reported strong first-quarter 2025 results, beating earnings estimates by 17.78% with $1.59 per share and achieving a 40.7% year-over-year increase. Despite this, cautious second-quarter guidance led to a 5% stock drop in after-hours trading. Tariff concerns and uncertain demand impacted outlook, with an expected 7-11% growth in net sales.

Amazon’s diverse seller base and broad selection aim to mitigate tariff-related disruptions, emphasizing growth in everyday essentials sales. AWS and advertising services saw significant growth, with AWS reaching an annualized revenue run rate of $117 billion and advertising revenue growing 19% to $13.9 billion. AI investments are accelerating, with a focus on custom chips and AI models like Amazon Nova Act.

Despite strong fundamentals, Amazon’s stretched valuation metrics raise concerns about near-term upside potential, with a forward P/S ratio of 2.79X compared to the industry average of 1.86X. Free cash flow declined due to aggressive capital investments in AWS and AI services. Investors may consider holding Amazon shares for long-term growth but wait for a better entry point for new positions.

For investors, holding Amazon shares for long-term growth potential may be prudent, despite near-term challenges. Prospective investors might wait for a better entry point due to cautious guidance and high valuation multiples. Amazon remains well-positioned with a diversified business model, high-margin revenue streams, and strategic investments in future technologies. AMZN currently holds a Zacks Rank #3 (Hold).



Read more at Nasdaq: Amazon Issues Mixed Q2 Guidance: Buy, Sell or Hold the Stock?