Amazon earnings primer: Why AI and tariffs are key to the second quarter

As Amazon prepares to unveil its second-quarter earnings, analysts are keenly observing how key factors like artificial intelligence and tariff implications will shape the company's financial landscape. The e-commerce giant is expected to report significant revenue figures, with Wall Street anticipating sales from its core online stores to reach approximately $58.98 billion. Additionally, seller services revenue is projected to hit $38.7 billion. However, concerns about tariffs and trade policies have raised red flags for investors, especially after CEO Andy Jassy noted that the unpredictability surrounding tariffs could impact results. Despite these challenges, Jassy reassured stakeholders that there has been no noticeable decline in consumer demand attributed to tariffs. As a mitigating strategy, Amazon has implemented measures to keep prices stable across its platform. According to analysts from Deutsche Bank, the current U.S. consumer environment remains robust, which has fostered optimism about Amazon's performance in the coming quarter. Interestingly, the shifting landscape of e-commerce has worked in Amazon's favor. As Chinese competitors like Shein and Temu face difficulties in maintaining their market presence due to increased tariffs, Amazon has reportedly captured a larger share of the U.S. e-commerce market. Looking ahead, Amazon's guidance for the third quarter will be crucial in assessing the continued risks associated with tariffs. Analysts project revenue for this period to soar to $173.3 billion. Beyond retail, Amazon's cloud computing division, AWS, also warrants attention. After a first-quarter revenue growth of 17%—the slowest in a year—analysts foresee similar growth trends moving forward. Jassy highlighted that AWS's expansion could have been even more pronounced without supply chain constraints affecting AI chip availability. This year, Amazon plans to invest up to $100 billion in AI initiatives across its cloud services, a fact that investors are keen to see reaffirmed in the earnings report. In an industry-wide push towards AI, Amazon has made notable advancements, including improvements to its Alexa voice assistant and establishing a dedicated AI division within its research and development sector. Jassy has also indicated that as the company integrates more AI technologies, it anticipates a reduction in its corporate workforce over the coming years. Despite substantial investments in AI, Amazon's stock performance has not kept pace with its tech counterparts, rising only 5.4% year to date compared to the approximately 20% gains of Meta and Microsoft. As the earnings report looms, all eyes will be on how Amazon navigates these challenges and opportunities in a rapidly evolving market.