Amazon (AMZN) Stock: Why Investors Are Selling Despite Strong Q1 Results

TLDR:

Table of Contents

Amazon posted Q1 earnings of $1.59 per share, exceeding analyst expectations of $1.36-$1.37
Revenue reached $155.7 billion, beating Wall Street forecasts of $155.1-155.2 billion
AWS revenue came in at $29.3 billion, slightly missing or meeting analyst targets
Q2 operating income guidance of $13-17.5 billion fell below $17.8 billion expected
Shares declined despite strong Q1 results due to conservative outlook and tariff concerns

Amazon delivered a strong first quarter that beat Wall Street projections, but the e-commerce giant’s stock took a hit after the company provided lower-than-expected guidance for the second quarter.

For Q1, Amazon reported earnings per share of $1.59, comfortably surpassing analyst estimates of around $1.36.

The company generated revenue of $155.7 billion, exceeding market expectations of approximately $155.1 billion.

This marks healthy growth compared to Q1 last year, when Amazon posted EPS of $0.98 and revenue of $143.3 billion.

Amazon Web Services (AWS), the company’s highly profitable cloud division, brought in $29.3 billion in revenue, which was either slightly below or meeting analyst forecasts depending on the source.

Despite these positive Q1 results, Amazon shares declined in the aftermath of the earnings release.

The main driver behind the negative market reaction was the company’s disappointing forecast for Q2 operating income.

Amazon $AMZN, fell over 6% after reporting Q1 2025 earnings…
EPS — Actual: $1.59 | Estimate: $1.37 🟢
Revenue — Actual: $155.7B | Estimate: $155.29B 🟢
The drop was due to lighter-than-expected Q2 guidance or was it this trendline?? 😂 pic.twitter.com/hUR9eopGAo
— Trader Edge (@Pro_Trader_Edge) May 2, 2025

White House Clash

Amazon recently found itself in hot water over tariffs after Punchbowl News reported the company was planning to display tariff impacts on product prices.

The White House quickly condemned the alleged plan, with Press Secretary Karoline Leavitt describing it as “a hostile and political act.”

According to reports, President Trump personally called Jeff Bezos to express his displeasure about the reported plan.

Amazon promptly denied the story, clarifying: “The team that runs our ultra-low cost Amazon Haul store considered the idea of listing import charges on certain products. This was never approved and is not going to happen.”
The president later seemed satisfied with the outcome, stating, “Jeff Bezos is very nice. Terrific. He solved the problem very quickly. He did the right thing. Good guy.”

Future Outlook

For Q2, Amazon projected operating income between $13 billion and $17.5 billion.

This guidance range fell short of the $17.8 billion that analysts were expecting.

The company also indicated it anticipates a 10-basis-point impact to its Q2 sales.

Amazon provided Q2 revenue guidance of $159 billion to $164 billion.

The midpoint of this range aligns with Wall Street’s consensus estimate of around $161.2 billion.

During the earnings call, CEO Andy Jassy addressed the tariff situation, noting that Amazon hasn’t yet observed any major effects from tariffs on customer demand or seller pricing.

However, he cautioned that this situation could evolve in the coming months.

UBS analyst Stephen Ju kept his Buy rating on Amazon stock but reduced his price target from $272 to $253, citing potential risks from tariffs.

According to Ju’s analysis, roughly 50% or more of products sold on Amazon could face tariff-related price increases.

“Consumers therefore might have to make more difficult choices on where to allocate their dollars,” the analyst wrote in a note to investors.

Ju also warned about potential ripple effects as exporters to the US could face revenue declines, possibly impacting global employment and international growth.

Following the earnings announcement, Amazon’s stock dropped over 1% in pre-market trading on Friday, after already declining 4% on Thursday.

The current tariff environment poses challenges for online retailers like Amazon.

With Chinese imports facing a 145% tariff and other countries subject to a blanket 10% tariff, many products sold online will likely experience price increases.

While Amazon continues to show strong growth and exceed expectations in many areas, investors appear concerned about the near-term outlook and how tariffs might affect the company’s performance going forward.

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