Amazon (AMZN) stock experienced a decline in early trading on Friday, following the company’s first-quarter earnings report released on Thursday. While the e-commerce and cloud giant surpassed analyst expectations for its Q1 performance, its financial guidance for the second quarter disappointed investors, overshadowing the positive Q1 results. The earnings report arrived shortly after Amazon was involved in a public dispute regarding its potential handling of upcoming trade tariffs.
Q1 Financial Performance Exceeds Estimates
For the first quarter, Amazon reported earnings per share (EPS) of $1.59 on total revenue of $155.7 billion. These figures came in ahead of Wall Street’s consensus estimates compiled by Bloomberg, which had projected EPS of $1.36 and revenue of $155.1 billion. Comparing to the same period last year, Amazon saw significant growth from Q1 2024, when it reported EPS of $0.98 on revenue of $143.3 billion. The company’s cloud computing division, Amazon Web Services (AWS), posted revenue of $29.3 billion, which was in line with market expectations.
Q2 Operating Income Guidance Disappoints
Despite the solid first quarter, Amazon’s forward-looking guidance for the second quarter proved to be a point of concern for investors. The company projected Q2 operating income to be in the range of $13 billion to $17.5 billion. This forecast fell short of the $17.8 billion analysts were anticipating. In comparison, Amazon’s operating income in the second quarter of 2024 was $14.7 billion. The company also mentioned an anticipated 10-basis-point impact to its Q2 sales, adding another layer of uncertainty to the outlook.
Stock Reaction
The market’s reaction to the Q2 guidance was negative. Amazon’s stock dropped by 4% on Thursday immediately following the earnings report and continued to decline, falling over 1% further in pre-market trading on Friday.
Recent Tariff Controversy
The earnings report came just days after a public disagreement between Amazon and the Trump White House. On Tuesday, a report from Punchbowl News suggested Amazon was preparing to incorporate the cost impact of tariffs into product prices. This prompted a strong reaction from the White House, with press secretary Karoline Leavitt calling it “a hostile and political act.” CNN also reported that President Trump personally contacted Jeff Bezos to express his disapproval of the potential plan.
Amazon subsequently denied that it intended to add tariff pricing to its main e-commerce website. In a statement, Amazon spokesperson Tim Doyle clarified that a team managing the “ultra-low cost Amazon Haul store” had considered the idea of listing import charges on certain products, but emphasized that this idea “was never approved and is not going to happen.” Later on Tuesday, President Trump commented positively on the matter, describing Bezos as “very nice” and stating he “solved the problem very quickly” and “did the right thing.” The episode highlighted the delicate position major tech companies find themselves in as they navigate trade policies and the potential for political scrutiny from the administration.
Broader Impact of Tariffs
Beyond the specific controversy, the broader implementation of tariffs is expected to have a significant impact on prices for consumers buying goods online. UBS analyst Stephen Ju estimated in an investor note that over 50% of products sold on Amazon could face some form of price increase related to tariffs, particularly given the 145% tariff on goods imported from China and a general 10% tariff on imports from other countries. Ju suggested that consumers might face “more difficult choices on where to allocate their dollars.”
He also highlighted potential “second order impacts” globally, as exporters to the U.S. may see reduced revenue, potentially leading to adjustments in their businesses and staffing levels, which could affect international employment and downstream economic growth (gross merchandise value).
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