Amazon Q1 2025
Main takes from video conference & earnings report with my comments & thoughts
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Q1 2025 Earnings and Conference Call Highlights
Amazon delivered a solid start to the year, with double-digit revenue growth, strong margin expansion, and record profitability across key segments. Retail demand held up well despite macro concerns and tariff-related uncertainty, while AWS posted its highest-ever operating margins, even as topline growth moderated. Ads continued to outperform peers, and Amazon emphasized resilience, efficiency, and AI innovation across its ecosystem.
Financial Highlights
Total Revenue: +10% YoY (FX neutral), driven by broad-based growth across 1P, 3P, Ads, and AWS.
Retail: 1P and 3P sales grew at similar rates, a shift from the usual 3P outperformance.
Advertising: +19% YoY, outpacing both Google and Meta.
AWS: +17% YoY growth, slightly slower than previous quarters but with a record 40% operating margin. Rule of 40 for AWS reaching 57%, not bad!
CapEx: 16% of revenue (vs. 10% in Q1'24), reflecting increased infrastructure spend for AI and fulfillment.
Free Cash Flow: Weakest point but not too bad, considering one-time charges related to inventory timing and returns (driven by tariffs).
π Management on efficiency:
"Weβre now seeing unit growth consistently outpace logistics costs β a sign of real operating leverage within our fulfillment network."
AWS: Cloud Resilience, Soaring Margins & AI Demand
While AWS growth slowed to 17%, it continues to generate exceptional profits, with operating margins reaching an all-time high (~40%).
Backlog: $189B (+20% YoY), with an average remaining contract life of 4.1 years.
AI Revenue: βMultibillion-dollar run rateβ growing at triple digits YoY.
Capacity bottlenecks remain due to surging demand for GPU clusters and components.
π CEO Andy Jassy on AWS strength:
"Weβre still in the early innings of AI. But to get full value from it, customers must modernize infrastructure and move data to the cloud β AWS is uniquely positioned to help them do that."
π On AI supply constraints:
"As fast as we deploy capacity, it's being consumed. Bottlenecks in motherboards and other components will ease over the year."
Retail: Steady Demand & Margin Expansion Despite Tariffs
Amazon saw resilient consumer demand, especially in everyday essentials, which grew twice as fast as the rest of retail.
North America and International Operating Margins: 7.2% and 3.7% (excluding one-time charges), up from 5.8% and 2.8% YoY.
Grocery strength: Amazon surpassed $100B in gross grocery sales last year β one in every three units sold in Q1 was an essential.
π Management on tariff impact:
"We havenβt seen demand pull back. If anything, some categories saw forward buying. We believe Amazon is more resilient to tariffs than other retailers."
π On everyday essentials and pricing power:
"Most of our sales arenβt high ASP items β essentials dominate our mix. Thatβs why we're confident in our value proposition, even in uncertain economic environments."
Advertising: Outperforming the Market
Ads revenue grew 19% YoY, gaining share against Google and Meta.
Amazon Ads' incremental revenue as a percentage of Google Adsβ growth rose from 33% to 40% YoY.
π On monetization momentum:
"Amazonβs ad business is now a critical driver of margin expansion β and weβre just scratching the surface in terms of targeting and visibility."
Strategic Commentary & Outlook
2Q 2025 Guidance: Revenue and EBIT slightly below consensus, though leadership emphasized long-term strength.
Ongoing investments in logistics, AI infrastructure, and international expansion remain top priorities.
π Jassy on positioning amid macro uncertainty:
"Customers turn to the providers they trust most in uncertain times β and weβre gaining market share during these periods. Weβve done it before, and Iβm optimistic weβll do it again."
Risks & Considerations
Tariff volatility and macroeconomic uncertainty could weigh on consumer sentiment.
AWS growth deceleration compared to Azure and GCP, though margin leadership remains unmatched.
CapEx ramp-up may pressure near-term FCF, though efficiency gains help balance the equation.
Final Take
Amazon entered 2025 with healthy top-line growth, rising profitability, and sustained leadership across retail, cloud, and ads. While AWS growth slowed slightly, record margins and surging AI demand β capped by AI-constrained supply β underscore the unit's long-term strength.
Retail demand remains resilient, with Amazon leveraging its wide selection of products, pricing, and customer trust to navigate tariff-related uncertainty. And with Ads gaining market share (over Google and Meta) and CapEx fueling long-term infrastructure, Amazon looks well-positioned to scale further in the AI and e-commerce eras.
π Jassyβs closing note:
"Weβre staying focused on what we can control β delivering value, speed, and trust to our customers β while building the infrastructure for whatβs next."
Thanks for reading Expanse Stocks! Thatβs all for the second Big Tech earnings digest of this season.
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