Wall Street sees Amazon primed to outperform ahead of the tech giant's 2nd quarter results

Business Insider

2 days ago

Expectations are high going into Amazon 's second-quarter earnings call.
Tariffs have been a concern for the e-commerce giant in 2025—back in April, news that Amazon was planning to display tariff costs on its website drew the ire of President Donald Trump—but Amazon's businesses have been resilient despite trade headwinds. The company quietly notched record sales in its Prime Day event earlier this month.
Wall Street expects Amazon to report $162 billion in revenue for the quarter, up 9% year over year. Earnings per share are projected to come in at $1.33, up from $1.26 in the prior quarter.
Of course, there's also the AI question. Amazon's earnings report comes after Alphabet and Microsoft's Q2 results, and those companies have set a precedent that Big Tech will continue to write big checks for AI investment.
The stock is up a modest 6% year-to-date, with plenty of room for upside. Here's what top analysts across Wall Street are saying ahead of Amazon's second-quarter earnings.
UBS: "Most-coiled" Big Tech company
Amazon is shaping up to be one of the most undervalued Magnificent Seven companies, according to UBS analyst Stephen Ju.
The stock's valuation was deeply revised downwards at the height of tariff volatility earlier this year, but it's poised for a comeback as trade deals solidify.
"We believe Amazon to be 'most-coiled' among our coverage given the more extensive investments across e-commerce, AWS, content/advertising, and Kuiper," Ju wrote. "As revenue begins to show up more meaningfully, the upward revisions to operating profit and FCF dollars should prove more dramatic vs its peers."
The e-commerce business is likely to continue seeing cost efficiencies through automation. Amazon also has a high-margin revenue source from its growing ad business, which should benefit as more companies increase their ad budgets in the second half of the year, according to UBS.
UBS expects AI spending to continue rising. Ju is raising his 2025 capex forecast for Amazon from $107 billion to $112 billion, citing improving cloud infrastructure sentiment.
The bank reiterated its "Buy" rating and raised its price target from $249 to $271, implying about 18% upside.
Jefferies: E-commerce remains strong
According to Brent Thill, senior technology research analyst at Jefferies, tariff fears and price increases have largely not materialized. Consumer demand has remained resilient, and inventory levels are stable going into the second half of the year.
"Tariffs appear overstated for now, and Amazon remains the go-to destination for online deals and continues to draw strong consumer and brand engagement," Thill wrote in a recent note.
Amazon Marketplace is dominated by large sellers, which are better positioned to absorb tariff shocks than smaller peers. The success of Prime Day further shows that Amazon continues to be a consumer favorite, beating out other retailers like Walmart, Target, and TikTok Shop, Thill said.
The thriving e-commerce platform is also driving revenue to Amazon's ad business. "Brands are allocating a larger share of performance marketing budgets to Amazon, with Amazon Sponsored ads cited as the most efficient ad format," Thill wrote.
Thill sees AWS emerging as the preferred platform for complex AI workloads, meaning that enterprise customers are increasingly turning to Amazon as they look to integrate AI into their business model.
Jefferies maintains its "Buy" rating and has a price target of $265 for the stock, implying upside of about 14%.
Bank of America: AWS will be key to future gains
Justin Post, research analyst at Bank of America, believes Amazon's high-margin cloud computing business will be the key value driver going forward.
Post will be looking for signs of AWS capacity increases that will lead to further AWS revenue growth in the second half of the year. Last quarter, Amazon said AWS growth was held back by chip shortages and energy constraints at its data centers. Post also expects Amazon's partnership with Anthropic to contribute significantly to the AWS business as the AI startup runs its training models on Amazon's infrastructure.
The One Big Beautiful Bill Act's new rules regarding bonus depreciation will also generate tax savings and a cash flow boost to Amazon later this year, the bank predicted.
BofA recently raised its price target from $248 to $265, which implies 14% upside from current levels.
Morgan Stanley: Lower tariffs and AWS growth drivers
After lowering its outlook on the stock in light of the April tariffs, Morgan Stanley is bullish on Amazon again. The firm now sees the risk of a 145% China tariff as largely off the table.
The stock is a "top pick," according to equity analyst Brian Nowak. He points to strength in both e-commerce and cloud computing.
Nowak sees four reasons for AWS to accelerate going forward:
Anthropic's growing contribution to AWS revenue could meaningfully scale from roughly $4 billion to $10 billion annually by next year.
Non-Anthropic AWS revenue has remained resilient in light of GPU shortages.
Non-GenAI AWS growth is gaining traction.
Morgan Stanley's CIO surveys show AWS gaining IT budget share, particularly at the expense of Oracle and Google Cloud.
On the retail side, the bank predicts that Amazon will capture around half of all incremental US e-commerce growth, thanks to an improving macro outlook and the company's scale and logistics infrastructure. Strategic moves like forward inventory buys and supplier renegotiations are also helping Amazon weather tariff shocks better than peers, Novak said.
Morgan Stanley raised its price target on the stock from $250 to $300, implying a 30% upside. In a bull case with faster AWS and retail growth, Novak sees the stock going to $350 in the next 12 months, a gain of more than 50%.