Amazon Q1 Earnings Beat Estimates, Stock Falls on Mixed Guidance

Amazon.com AMZN delivered first-quarter 2025 earnings of $1.59 per share, which increased 40.7% from the year-ago quarter and beat the Zacks Consensus Estimate by 17.78%.AMZN’s net income increased 64.4% year over year to $17.1 billion in the first quarter. Net sales of $155.7 billion rose 9% year over year, slightly ahead of management’s guidance of $151-$155.5 billion and beat the Zacks Consensus Estimate by 0.72%.Excluding the $1.4 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 10% compared with the first quarter of 2024.Find the latest earnings estimates and surprises on Zacks Earnings Calendar.Top-line growth was driven by solid momentum across the North America and International segments, partially offset by slow yet steady growth in the Amazon Web Services (“AWS”) segment. The growing advertising business also benefited the company in the reported quarter. AWS’ growing investments in generative AI are likely to continue aiding it in gaining momentum among cloud customers in the near term.Amazon’s strong global presence, growing Prime momentum and increasing efforts toward gaining strong traction among small and medium businesses are likely to drive its financial performance in the days ahead. However, geopolitical tensions, foreign exchange headwinds, inflation, interest rates and regional labor market constraints are concerning.Amazon.com, Inc. Price, Consensus and EPS Surprise Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. QuoteTop-Line Details of AMZNProduct sales (41.1% of sales) increased 5% year over year to $63.9 billion. Service sales (58.9% of sales) jumped 11.3% from the year-ago quarter to $91.6 billion. By segment, North America revenues (59.7% of sales) rose 7.6% from the year-ago quarter to $92.88 billion, which beat the Zacks Consensus Estimate by 0.2%. International revenues (21.5% of sales) gained 4.9% year over year to $33.5 billion, which beat the consensus mark by 3.4%. AWS revenues (18.8% of sales) rose 16.9% year over year to $29.3 billion, which matched the consensus mark. Strengthening relationships with third-party sellers remained another positive. In the reported quarter, sales generated by third-party seller services rose 6% on a year-over-year basis to $36.5 billion, which lagged the Zacks Consensus Estimate by 0.4%.Sales from robust advertising services increased 18% year over year to $13.9 billion, which beat the consensus mark by 2.22%. AMZN experienced 8% year-over-year growth in its physical store sales, which were $5.53 billion in the reported quarter, up 6% year over year. The figure beat the consensus mark by 1.86%.The company’s online store sales were $57.4 billion, up 5% year over year. The figure beat the Zacks Consensus Estimate by 1.07%.Amazon’s Retail and Consumer Business in Q1Strength in Prime on the back of ultrafast delivery services, and expanding original content and an international slate of content on Prime Video were positives. Amazon witnessed 10% year-over-year growth in its subscription services sales, which were $11.5 billion in the reported quarter. The figure beat the consensus mark by 2.77%.Amazon continues to focus on selection, value, and shipping speed in its stores business. The company welcomed well-known brands, such as Oura Rings, Michael Kors, and The Ordinary, along with introducing a new luxury shopping experience with Saks, offering high-end brands like Dolce&Gabbana and Balmain. During the first quarter, Amazon held multiple deal events worldwide, helping customers save more than $500 million across the Big Spring Sale in the United States and Canada, Spring Deal Days in Europe, and Ramadan/Eid sales in the Middle East.The company announced its 11th Prime Day in July and committed $4 billion through 2026 to expand rural delivery, while continuing to improve workplace safety metrics substantially over the past five years. In the reported quarter, Amazon set new delivery speed records and delivered more items same-day or next-day than in any previous quarter.Entertainment ventures progressed with a James Bond franchise joint venture and strong viewership for Reacher Season 3, which drew 54.6 million viewers in its first 19 days.AWS and AI Innovations in Q1AWS signed new agreements with major companies, including Adobe ADBE, Uber Technologies UBER, Nasdaq, Ericsson ERIC, Fujitsu, and many others. Amazon noted that more than 85% of global IT spending is still on-premises, suggesting substantial future growth potential for AWS.AMZN's AI business has reached a multi-billion-dollar annual revenue run rate with triple-digit percentage growth year over year. The company is aggressively investing in AI capabilities across all levels of the technology stack. Amazon introduced Amazon Nova Premier, its most capable multimodal model for complex tasks like coding and document understanding, alongside Amazon Nova Sonic, a speech-to-speech foundation model enabling highly accurate voice applications. The company also unveiled Amazon Nova Act SDK, designed to perform actions within web browsers by breaking down complex workflows into reliable atomic commands. These innovations supplement Amazon's broader AI strategy, which includes making leading models like Anthropic's Claude 3.7 Sonnet and Meta's Llama 4 available through Amazon Bedrock. CEO Andy Jassy emphasized that Amazon is "not dabbling" in AI but is intentionally building comprehensive capabilities to help both internal and external developers leverage AI extensively across their businesses.Other notable announcements by this Zacks Rank #3 (Hold) company included the first satellite launch for Project Kuiper, a joint venture to create the next generation of the James Bond film franchise, and continued safety improvements across operations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Operating Details of AMZNOperating expenses were $137.26 billion, up 7.2% from the year-ago quarter. As a percentage of revenues, the figure contracted 120 basis points (bps) on a year-over-year basis to 88.2%.The cost of sales, fulfillment and technology and infrastructure expenses increased 5.9%, 10.2% and 12.6% year over year to $76.9 billion, $24.5 billion and $22.9 billion, respectively.Sales and marketing and other operating expenses were $9.7 billion and $308 million, up 1% and 35.1% year over year, respectively. General and administrative expenses declined 4.2% to $2.62 billion. Operating income increased 20.2% year over year to $18.4 billion in the first quarter. As a percentage of revenues, the figure expanded 110 basis points (bps) on a year-over-year basis to 11.8%.North America segment operating income was $5.84 billion, up 17.2% from the year-ago quarter.International segment operating income was $1.01 billion, up 12.6% from the year-ago quarter. AWS segment operating income was $11.5 billion, up 22.6% from the year-ago quarter.Amazon's Balance Sheet & Cash FlowAs of March 31, 2025, cash and cash equivalents were $66.2 billion, down from $78.7 billion as of Dec. 31, 2024.Marketable securities totaled $28.3 billion as of March 31, 2025, up from $22.4 billion as of Dec. 31, 2024.The long-term debt was $53.3 billion at the end of the reported quarter, up from $52.6 billion at the end of the previous quarter.Operating cash flow increased 15% to $113.9 billion for the trailing 12 months compared with $115.8 billion for the trailing 12 months ended Dec. 31, 2024.Free cash flow decreased 48% to $25.9 billion for the trailing 12 months compared with $38.2 billion for the trailing 12 months ended Dec. 31, 2024.GuidanceAmazon stock dipped as much as 5% in after-hours trading due to mixed guidance for the second quarter. High tariffs imposed by U.S. President Donald Trump on goods imported from China have cast uncertainty on retailers such as Amazon. AMZN expects operating income for the current quarter to be between $13 billion and $17.5 billion compared with the average estimate of $17.7 billion, according to LSEG data.For second-quarter 2025, Amazon expects net sales between $159.0 billion and $164.0 billion, or to grow in the range of 7-11% compared with second-quarter 2024. This guidance anticipates an unfavorable impact of approximately 10 basis points from foreign exchange rates.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. 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