Earnings forecast $AMZN

$AMZN earnings report arrives at a pivotal moment for the tech sector. As one of the “MAG7,” Amazon’s results will not only reflect its own resilience but also signal broader trends in consumer spending, cloud adoption, and AI infrastructure investments.

I’m expecting $AMZN to deliver a double beat in Q3 2025, surpassing both revenue and EPS estimates. My forecast of $179B in revenue edges above the $177.8B consensus, driven by strong AWS growth (~$32.5B), resilient ecommerce (~$95B in North America), and accelerating ad revenue (~$14B+). For EPS, I project $1.70 against the $1.57-$1.58 consensus, reflecting Amazon’s history of cost discipline and highmargin contributions from AWS and advertising.

Here's the reasoning behind my forecast:

Cloud: AWS is seeing “hyperscale demand” for AI workloads, a trend likely to intensify as companies scale cloud infrastructure for AI applications.

E-commerce: Despite softening consumer confidence in 2025, US retail spending has remained resilient, supported by low unemployment and wage growth. Amazon’s North American e-commerce sales are projected to reach ~$95 billion, driven by Prime Day spillover from Q2, expanded same-day delivery, and automation in fulfillment centers reducing costs by ~20%. These efficiencies improve margins and allow Amazon to capture market share in a competitive retail landscape.

Ads: Amazon’s advertising segment, often underappreciated in my opinion, is expected to exceed $14 billion in Q3, up from ~$12 billion in Q1 2025 (+19% YoY). This acceleration is driven by AI-powered ad targeting, leveraging Amazon’s first-party shopping data to deliver high-ROI campaigns for advertisers. With ~40% margins, advertising acts as a significant profit driver, offsetting thinner e-commerce margins (25–30%).

The EPS projection of $1.70, above the $1.57–$1.58 consensus, reflects Amazon’s ability to drive profitability through cost discipline and high margin businesses, despite significant CapEx pressures. Here’s the rationale:

Cost Discipline in Operations: Amazon has consistently improved operational efficiencies, particularly in its ecommerce segment. Automation in fulfillment centers (robotics) has reduced logistics costs by ~20%, while sameday delivery expansions have increased order volumes without proportional cost increases. These savings help offset the impact of rising shipping and labor costs.

In Q2 2025, Amazon’s EPS of $1.68 beat estimates by 26%, driven by similar cost controls. This trend is expected to continue, with management’s focus on “cost to serve” reductions supporting profitability.

High-Margin Contributions:

AWS Margins: AWS’s operating margins, while slightly compressed at ~33% in Q2 (vs. 39.5% in Q1) due to AI CapEx, remain a key profit driver. Q3 margins are expected to stabilize, contributing significantly to operating income (~$20 billion vs. consensus $19.5B–$19.8B). Early ROI from AI investments, such as Trainium chips, bolsters AWS’s profitability.

Advertising Margins: The ad segment’s ~40% margins provide a high-margin buffer, amplifying EPS upside. As advertising grows faster than lower-margin e-commerce, it disproportionately boosts earnings.

Historical EPS Outperformance: Amazon’s EPS has beaten consensus in the last 4 quarters, with an average surprise of over 20%. This track record, combined with disciplined expense management, supports a $1.70 EPS forecast, roughly 10% above the midpoint of consensus.

Q4 guidance will be a critical driver of stock reaction, given the holiday season’s importance and ongoing AI investments.

This is what i think we will get:

Management will likely highlight Prime membership growth, sameday delivery, and early Q4 holiday trends, signaling confidence in consumer spending despite softer macro confidence.

AWS and AI Focus: Jassy will emphasize AWS’s AI momentum, with Bedrock and SageMaker driving enterprise adoption. Commentary on CapEx ROI and the October 21 outage’s remediation will reassure investors.

Conservative Tone: Amazon typically guides conservatively to ensure beats, as seen in Q4 2024’s $165.5B–$170B range (actual: $170.3B). However, a high-end revenue guide of $188B or operating income above $20B could spark a rally. This is important to keep in mind, usually market doesn't get this and its important to understand how historically each company draft their guidance.

While the outlook is bullish, several risks could temper results or guidance:

CapEx Pressure: Q3 CapEx (~$31B) and full-year ~$118B for AI infrastructure may compress AWS margins (~33% vs. 39.5% in Q1 2025), potentially disappointing investors if ROI timelines stretch.

Macro Headwinds: Softer consumer confidence or unexpected tariff impacts could dampen e-commerce or ad spending, particularly internationally. If a deal with China is signed , or even hinted, any sortees from consumer could be ignored.

Cloud Competition: Microsoft and Google Cloud are gaining share, and any signs of AWS losing ground could spook markets.

Regulatory Scrutiny: Ongoing FTC probes into Amazon’s practices could create headline risk, though material impacts are unlikely in Q3.

Guidance Miss: A conservative Q4 guide ($AMZN USUALLY guides conservatelly) (revenue < $183B or operating income < $16B) could trigger a selloff, as seen post-Q2 (-8%).

If my forecast is accurate and things materializes as i expect, we could see $AMZN rallying 5–8% post-earnings to $235–$240, with a stretch to $250 if Q3 results and Q4 guidance hit the high end ($179B+ revenue, $20B+ operating income, and Q4 revenue near $188B). This implies 7–12% upside from the current ~$224. Longer-term, full-year 2025 EPS of $6.81 (+23% YoY) supports a $280+ target by year-end 2026, driven by AI monetization and e-commerce scale. Amazon’s 14x forward EV/EBITDA valuation, below the Nasdaq-100’s 33x P/E, offers room for upside if execution remains strong.

Disclaimer: This article provides a forecast for Amazon’s Q3 2025 earnings and Q4 guidance based on an analysis of multiple variables, including revenue streams (AWS, e-commerce, advertising), EPS, operating income, historical performance, and market trends. Forecasting involves weighing these factors to form an educated estimate, but it is inherently subject to uncertainties and may be slightly inaccurate due to unforeseen events or changes in market conditions. This content is intended solely as an educational resource to help readers understand the key metrics and elements to consider when elaborating a company forecast. It is not financial advice or a recommendation to buy or sell any securities. Always consult a qualified financial advisor and conduct your own research before making investment decisions.