Honestly, if you just looked at the headlines when the Amazon Q2 earnings 2025 dropped on July 31, you probably would've been kinda confused. The numbers themselves were actually massive. We’re talking about a company that pulled in $167.7 billion in a single three-month stretch. That's up 13% from the year before. Most companies would kill for those kinds of "problems."
But Wall Street is a fickle beast.
Despite beating expectations on both the top and bottom lines—earning $1.68 per share when analysts were only looking for $1.33—the stock took a nasty 8% tumble the next day. It wiped out about $17 billion of Jeff Bezos' net worth in 24 hours. Why? Because while the retail side of the house is humming like a well-oiled machine, the "cloud wars" are getting messy, and Amazon’s spending habits are starting to make investors a little twitchy.
The AWS Growth Gap: Why the Market Got Nervous
The real story of the Amazon Q2 earnings 2025 is the tug-of-war happening over at AWS (Amazon Web Services).
AWS brought in $30.9 billion this quarter. That’s a 17.5% jump year-over-year. On its own, that’s great. But when you look at the neighbors, it starts to look a bit sluggish. Microsoft Azure and Google Cloud are growing at 39% and 32% respectively. Basically, Amazon is still the biggest kid on the playground, but the other kids are running way faster right now.
📖 Related: Ryan and Ashley Smith: What Most People Get Wrong About Utah’s Power Couple
CEO Andy Jassy has been pretty blunt about this. He says the issue isn't demand. People want AWS. The issue is capacity. Amazon literally cannot build data centers fast enough to keep up with the AI boom. They’re facing bottlenecks in everything from power grids to specialized chips.
- AWS Revenue: $30.9 billion (Up 17.5%)
- Operating Income from AWS: $10.2 billion
- The Backlog: A staggering $195 billion in future commitments
It’s a weird spot to be in. You have nearly $200 billion in orders waiting to be filled, but you’re losing "growth momentum" because you haven't finished the buildings yet.
The $125 Billion Elephant in the Room
If you want to know where Amazon’s lunch money is going, look at their capital expenditures.
They are projected to spend over $125 billion on capex in 2025. To put that in perspective, that’s more than the GDP of many small countries. Most of this is being funneled into AI infrastructure. They’re building their own chips (Trainium2 and Inferentia) to stop being so dependent on Nvidia, and they’re expanding "sovereign clouds" for governments that want their data kept within their own borders.
Investors are worried because this spending is eating into the free cash flow. In Q2 2025, the trailing twelve-month free cash flow dropped to $18.2 billion. Compare that to the $53 billion they had the year before. That is a massive cliff.
But there’s a nuance here most people miss.
Unlike some other tech giants who are spending on AI and hoping it works (looking at you, Meta), Amazon is "double monetizing." They use the AI internally to make their shipping robots smarter and their ads more relevant, and then they turn around and sell that same infrastructure to you through AWS. It's a safer bet, but it's an expensive one.
Efficiency is the Secret Sauce
While everyone was obsessed with the cloud, the retail side actually had a stellar quarter.
The North America segment hit $100.1 billion in sales. More importantly, they’ve fundamentally changed how they move boxes.
They’ve cut the distance a package travels by 12%. They’ve reduced "handling touches" by 15%. By regionalizing their network, they’re getting stuff to your door faster and cheaper. This is why the North America operating margin jumped to 7.5%. For a business that used to lose money on every box, that’s a huge win.
Advertising: The Real Profit Engine
The sleeper hit of the Amazon Q2 earnings 2025 was definitely the ad business.
It grew 22% to $15.7 billion.
Think about that. Amazon is now a top-tier media company. Advertising now makes up nearly 10% of their total revenue. If you’ve noticed that your search results are covered in "Sponsored" tags, this is why. It’s high-margin, it’s growing faster than the rest of the company, and it’s effectively subsidizing the cost of shipping that 10-pound bag of dog food to your house in two hours.
They also made a big play in Connected TV.
By partnering with Roku and Disney, and stuffing ads into Prime Video, they’re capturing budgets that used to go to traditional cable TV. Brands are flocking to it because Amazon actually knows if you bought the product after seeing the ad. Google and Meta can only guess; Amazon has the receipt.
What Most People Get Wrong About the Outlook
The stock tanked partly because the Q3 guidance was "cautious."
Amazon expects sales between $174 billion and $179.5 billion. Wall Street wanted more.
But you've gotta look at the macro environment. We’ve got shifting interest rates, weirdness in global trade, and a consumer that is starting to get a little picky about where they spend. Amazon is being conservative. They’d rather under-promise and over-deliver, which is a classic Jassy move.
Real Talk for Investors and Sellers
If you’re a seller on the platform, the message is clear: it’s a pay-to-play world. Organic reach is dying. You need to be leaning into their AI-powered ad tools because that’s clearly where the company is focusing its energy.
For investors, the drop in free cash flow is scary, but it’s a cycle. We saw this in the early 2000s when they built the warehouses. We saw it in 2010 when they built AWS. Each time, the spending felt reckless until the profits started rolling in.
Moving Forward: Actionable Steps
- Watch the Capex: Keep an eye on the Q4 numbers. If that $125 billion figure climbs even higher without a corresponding jump in AWS growth, then it’s time to worry.
- Monitor AWS Margins: They slipped from 39.5% to 32.9% this quarter. Some of that was seasonal (stock-based comp), but if it stays low, it means the competition is forcing them to cut prices.
- Focus on Logistics: For sellers, the expansion of same-day delivery to 4,000+ small towns by the end of 2025 is a massive opportunity. Get your inventory into their FBA regional hubs now.
- Ad Optimization: If you aren't using Amazon's DSP (Demand Side Platform) for video ads, you're missing the fastest-growing part of their ecosystem.
The Amazon Q2 earnings 2025 showed a company in transition. They are moving from being a "store that has a cloud" to an "AI infrastructure company that has a store." It’s a messy, expensive shift, but based on the $195 billion backlog, the demand is definitely there. You just have to be patient enough to let them finish building the data centers.