Earnings Report Preview | AI + E-commerce Dual Drive: Can Amazon Successfully Weather the Tariff Crisis?

According to the Zhitong Finance APP, Amazon (AMZN.US) will announce its Q1 2025 financial report after the U.S. stock market closes on May 1, Eastern Time.

Strong Growth Momentum

On February 6, Amazon achieved revenue and profit growth with better-than-expected performance, boosting market confidence in its ability to exceed expectations again.

Last quarter, revenue saw a solid year-on-year growth of 10.5%, and adjusted earnings per share jumped from $1 to $1.86. This high-quality profit growth is attributed to strong operational leverage—despite R&D expenses accounting for over 18%, the operating profit margin in Q4 increased from 7.8% to 11.3% year-on-year. This positive signal highlights management's high regard for operational efficiency, injecting confidence into the upcoming financial report.

As of the end of the 2024 fiscal year, Amazon boasts over $100 billion in cash reserves, providing ample ammunition for innovative investments in Q1. It is expected that management may announce new products or services in the financial report, and the continued expansion of its ecosystem is likely to receive a positive response from investors.

The latest quarterly report is scheduled for release on May 1. The market generally expects Amazon's Q1 earnings per share to be $1.36, a year-on-year increase of 39%, with revenue growth exceeding 8%, reaching $155.1 billion. Multiple factors support this optimistic expectation:

Amazon continues to maintain an absolute leading position in the e-commerce and cloud computing sectors. According to Grand View Research, its market share in the U.S. e-commerce market is as high as 37.6%, a significant advantage in a market exceeding $8 trillion with a compound annual growth rate of 16.4% (until 2030).

The global digital transformation and artificial intelligence (AI) wave provide strong tailwinds for Amazon. Although the growth rate of cloud computing briefly slowed in 2022, the rapid application of AI technology has reignited the growth engine, with the industry's long-term compound annual growth rate expected to remain high at 16%. Wedbush's recent bullish view on "strong AI spending" further supports the expectation of robust growth for AWS.

In addition to revenue prospects, there is also good news on the cost side. Reports indicate that the company plans to cut 14,000 management positions this year, which could lead to an annualized savings of $4.2 billion, assuming an average salary of $300,000 per person. CEO Andy Jassy reiterated his commitment to maintaining a "lean culture" in his letter to shareholders.

From a seasonal perspective, Amazon typically performs well from April to July, increasing the likelihood of continued upward momentum after the financial report. The current RSI indicator is at a neutral position of 50, indicating that the stock price is far from entering the overbought territory before the financial reportWall Street analysts are also optimistic about Amazon's performance in the first quarter, with top investment banks such as Bank of America, Citigroup, and Morgan Stanley recently reaffirming their bullish stance. This confidence stems from both the company's fundamentals and its excellent track record of exceeding performance expectations.

Bank of America believes that, compared to Walmart's (WMT.US) 32 times GAAP price-to-earnings ratio valuation level in 2026, Amazon's current expected price-to-earnings ratio of 23 times is significantly undervalued. Although macroeconomic pressures have prompted some investors to turn to this Arkansas retail giant, analyst Justin Post emphasizes that considering the price-to-earnings discount factor, the narrative of this Seattle e-commerce leader's long-term layout in the AI field and improvement in retail profit margins still holds.

Risk Challenges

Nevertheless, the tariff war still casts a shadow over the market. Given that most products on the Amazon platform are sourced from China, an escalation of friction between China and the United States could lead to short-term pressure on platform transaction volumes.

Citigroup's Ronald Josey reiterated Amazon's "Buy" rating and a target price of $225, noting that the company's performance is expected to meet or slightly exceed expectations. However, he cautioned that the demand for AWS cloud services and the impact of China's related tariff policies may dominate performance in the second half of the year.

Morgan Stanley continues to list Amazon as a top pick and maintains an "Overweight" rating, but the firm warns that macro uncertainties surrounding the company are continuing to brew. Based on the judgment that performance visibility requires time to verify, the firm has lowered its 2026 earnings per share expectation to $7, setting a target price of $245.

Raymond James downgraded the rating of this e-commerce and cloud computing giant from "Strong Buy" to "Outperform," stating that it believes the market is underestimating the pressure the company will face on EBIT in 2025-26.

Analyst Josh Beck pointed out issues such as macroeconomic fluctuations, heightened tariff risks, and increased investment intensity. He warned, "Regardless of whether tariff policies persist, given Amazon's presence in the Chinese market (accounting for about 30% of total product value / 15% of advertising revenue) and its digital service providers in rural areas of the United States (accounting for 11% of logistics business), its supply chain and logistics diversification strategy may drag down performance." The firm significantly lowered its target stock price from $275 to $195.

However, against the backdrop of a strong U.S. labor market, resilient consumer spending may help absorb the shock, with the establishment of alternative supply chains expected to take 2-3 quarters to complete. Bank of America analyst Post stated that with its scale advantages, Amazon is likely to further expand its retail market share amid tariff turmoil.

Additionally, despite its significant advantages in the e-commerce sector, Amazon is facing fierce competition in the cloud computing space from giants like Microsoft and Google. These well-funded, cash-rich tech giants also possess disruptive innovation capabilities, and the accelerated iteration of cloud computing technology adds further uncertainty to the industryJefferies analyst Brent Thill maintains a "Buy" rating on Amazon, adjusting the target price from $250 to $240 due to short-term revenue and margin risks from the Chinese import business. However, he emphasizes that AWS remains the crown jewel and is optimistic about the growth momentum brought by AI