Amazon Stock Falls Despite Q2 Earnings & Revenues Beat Estimates

Core Insights - Amazon.com (AMZN) reported second-quarter 2025 earnings of $1.68 per share, a 36.6% increase year-over-year, surpassing the Zacks Consensus Estimate by 26.32% [1] - Net income rose 34.8% year-over-year to $18.2 billion, with net sales reaching $167.7 billion, a 13% increase, exceeding management's guidance and the Zacks Consensus Estimate [1][2] Financial Performance - Excluding a $1.5 billion negative impact from foreign exchange, net sales increased 12% year-over-year [2] - Product sales accounted for 40.7% of total sales, increasing 10.8% to $68.2 billion, while service sales, making up 59.3%, jumped 15.1% to $99.4 billion [4] - North America revenues rose 11.1% to $100 billion, and international revenues increased 16.1% to $36.7 billion, both exceeding consensus estimates [4] - AWS revenues grew 17.5% to $30.8 billion, also beating consensus estimates [5] Segment Performance - Third-party seller services generated $40.3 billion in sales, an 11% year-over-year increase, surpassing the Zacks Consensus Estimate [5] - Advertising services saw a 23% year-over-year growth to $15.6 billion, exceeding consensus expectations [6] - Prime services revenues reached $12.2 billion, a 12% increase year-over-year, indicating strong subscription growth [7] Strategic Developments - Amazon's AI initiatives are gaining traction, with significant investments planned for AI infrastructure, expected to reach over $100 billion [8][14] - AWS secured new partnerships with major enterprises, enhancing its position as a preferred infrastructure provider [13] Operating Metrics - Operating expenses increased 11.4% year-over-year to $148.5 billion, while operating income rose 30.7% to $19.1 billion [15][16] - North America segment operating income increased 48.4% to $7.51 billion, while international segment operating income rose significantly from $273 million to $1.49 billion [16][17] Balance Sheet and Cash Flow - Cash and cash equivalents decreased to $57.7 billion, while marketable securities increased to $35.4 billion [18] - Operating cash flow increased 12% to $121.1 billion, but free cash flow decreased to $18.2 billion [19] Guidance - Amazon projected weaker-than-expected operating income for Q3 2025, leading to a stock dip of over 7% [20] - Expected net sales for Q3 2025 are between $174 billion and $179.5 billion, reflecting a growth rate of 10-13% year-over-year [21]