Amazon reported results for the first quarter of 2025 that surpassed analyst expectations. However, the performance did not immediately boost the company's stock, trading under the ticker AMZN. Shares remained subdued as investors focused on slower growth within its cloud computing division, AWS. Concerns about the broader economic environment and potential trade tariffs also contributed to market sentiment.
Growth in AWS slowed to 17% year-over-year in Q1, down from 19% reported in the previous quarter previous quarter. Despite this deceleration, Amazon highlighted a large backlog of deals totaling $189 billion at the end of the quarter. This backlog represents a 20% increase from the prior year.
Company management indicated a focus on bringing additional capacity online in the latter half of the year. This suggests potential for growth to accelerate. The backlog supports future revenue, with contracts averaging more than four years in length. AWS also benefits from businesses moving workloads to the cloud and the increasing adoption of generative AI technology.
Beyond cloud services, Amazon's retail business shows continued strength. Extensive product selection, competitive pricing, and rapid delivery help the company navigate challenges like import tariffs. These factors position Amazon strongly in e-commerce. The Prime membership program supports customer loyalty and generates recurring revenue.
Improvements in the delivery network have allowed Amazon to reduce delivery times. This faster service supports sales and customer engagement, particularly within the Prime customer base. Optimization of the fulfillment network and last-mile operations has also lowered cost per unit for the second year in a row. Investments in automation and robotics aim to further enhance efficiency.
Amazon's advertising business is also contributing significantly to profitability. Advertising revenues grew 19% year-over-year in Q1. Brands are increasingly using Amazon's platform to reach customers throughout the purchasing process.
Amazon's business model includes e-commerce, cloud computing through AWS, advertising, and investments in AI. This structure helps the company manage economic conditions and support its trajectory. Wall Street analysts rate AMZN stock as a "Strong Buy," with an average price target suggesting potential upside from its recent closing price Analyst Ratings.
