Amazon Stock Slides Despite Earnings Beat; What’s the Story with AWS?
Amazon (AMZN•NASDAQ) stock experienced a surprising dip even after the company posted stronger-than-expected second-quarter earnings. At first glance, the numbers looked solid, revenue soared, profits surged, and advertising sales climbed. But the underlying concerns, especially surrounding Amazon Web Services (AWS), cast a shadow over the good news.
For investors and market watchers, the drop raises a critical question: What’s going on with AWS, and how does it affect the broader outlook for Amazon stock?
Amazon’s Q2 Earnings Beat Expectations
Amazon delivered a strong earnings report for Q2 2025. The company posted $167.7 billion in revenue, beating analyst estimates of $162.2 billion. Net income came in at $18.2 billion, up sharply from $13.5 billion in the same quarter last year.
Amazon’s North American retail business performed well, thanks to the growing Prime membership base and efficient logistics. Its advertising segment was another bright spot, bringing in over $11.6 billion, marking a 27% year-over-year increase. These figures reflect Amazon’s strength in the e-commerce and digital advertising markets.
Despite all this, Amazon stock fell over 4% in after-hours trading following the earnings release.
AWS Growth Slows And Wall Street Notices
The heart of the issue lies in Amazon Web Services (AWS). AWS brought in $30.8 billion in revenue during Q2 2025, just slightly above the estimated $30.7 billion.
AWS has long been Amazon’s most profitable arm. It powers countless websites, apps, and services around the globe. But with increasing competition from Microsoft Azure and Google Cloud, Amazon’s dominance is under pressure.
CEO Andy Jassy admitted on the earnings call that while demand for AI capabilities is booming, many clients are being more cautious with their cloud spending. Companies are optimizing current workloads rather than rapidly expanding new ones. This shift in spending behavior has dampened AWS’s previously unstoppable growth.
Why Is AWS So Critical to Amazon Stock?
Investors often look at AWS as the engine that drives Amazon’s profit machine. While the retail and logistics businesses operate on thinner margins, AWS typically delivers a much higher operating margin, nearly 30% or more.
Slower AWS growth raises alarms not just about the cloud segment, but about Amazon’s overall valuation. If AWS continues to grow at a moderate pace while competitors like Microsoft grow faster in the AI cloud space, it could reshape how analysts value Amazon stock.
In the broader stock market, tech giants are under pressure to show strong AI-related gains. Amazon’s slower-than-expected AWS acceleration raises concerns about its future place among leading AI stocks.
The Role of AI in Amazon’s Future
Amazon is betting big on Artificial Intelligence to regain momentum in AWS. The company has launched a suite of AI tools and custom chips like Trainium and Inferentia to attract developers and businesses. It is also investing heavily in its partnership with Anthropic, an AI startup building advanced language models.
Still, the market wants faster adoption and results. Microsoft, with its deep integration of OpenAI’s ChatGPT into Azure, has seen stronger AI-related cloud growth. Amazon is playing catch-up, and the clock is ticking.
Stock Market Reaction: What’s Behind the Selloff?
Despite the earnings beat, the stock market often reacts to future guidance more than present performance. And in Amazon’s case, the slight underperformance in AWS growth spooked investors. There’s also a general sense that Amazon stock is priced for perfection, and any stumble, even a small one, leads to a pullback.
Analysts remain optimistic, but they are adjusting expectations. Some firms have trimmed their price targets slightly, focusing on how well AWS can compete in the AI cloud battle over the next few quarters.
Is Amazon Still a Buy?
From a stock research perspective, Amazon remains a dominant force in multiple sectors: e-commerce, cloud computing, advertising, logistics, and AI. Its diversified model gives it strength, even when one segment underperforms.
Long-term investors may view this dip as a buying opportunity, especially if they believe in the company’s AI roadmap. Short-term traders, however, may remain cautious until AWS’s growth shows signs of acceleration.
Outlook: What to Watch in the Coming Quarters
There are several key indicators to track going forward:
- AWS’ growth rate, especially in enterprise and AI workloads
- The performance of Amazon’s AI investments and partnerships
- Continued expansion in advertising and logistics technologies
- General macroeconomic conditions affecting tech and retail spending
If AWS picks up speed and Amazon continues growing in digital ads and AI, we could see Amazon stock rebound sharply. But if the cloud war intensifies and Amazon fails to deliver innovation fast enough, the stock could stay under pressure.
Final Thoughts
Amazon delivered a strong quarter, but the spotlight remains firmly on AWS. Slower growth in its most profitable division is raising concerns among investors, even as the company performs well in other areas. The next few quarters will be crucial in determining whether Amazon can stay ahead in the high-stakes AI and cloud race. For now, investors are watching closely, and so is Wall Street.
FAQs
Even though Amazon beat earnings estimates, investors were concerned about the slower-than-expected growth in AWS, which is the company’s most profitable segment.
Yes, AWS remains a top player in the cloud market, but competition from Microsoft Azure and Google Cloud is heating up, especially in AI services.
That depends on your risk tolerance and time horizon. Amazon has strong fundamentals and long-term potential, but near-term volatility may persist as AWS growth adjusts.
Disclaimer:
This content is made for learning only. It is not meant to give financial advice. Always check the facts yourself. Financial decisions need detailed research.