Amazon (AMZN) Stock: Tariff Worries and AI Investment Ahead of Q1 Earnings

TLDR

Amazon reports Q1 earnings today with expected revenue of $155.2 billion and EPS of $1.37 UBS analyst lowered price target from $272 to $253 due to tariff risk concerns AWS maintains 30% market share in cloud computing, leading Microsoft (21%) and Google (12%) Amazon plans to spend $100 billion on capital expenditures this year, mostly on AI infrastructure AMZN stock is down about 16% year-to-date after surging 160% between 2023-2024

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Amazon faces a balancing act between tariff pressures and AI investments as it prepares to report first-quarter earnings today after market close. Wall Street expects the e-commerce giant to deliver $155.2 billion in revenue with adjusted earnings per share of $1.37.

Amazon.com, Inc. (AMZN)

Tariff concerns have cast a shadow over the company’s near-term outlook. UBS analyst Stephen Ju recently reaffirmed his Buy rating but lowered his price target to $253 from $272.

The analyst cited “tariff-driven demand destruction” as a key risk factor. With roughly half of U.S. goods being imported, higher prices could hurt Amazon’s revenue growth.

Political tensions have made tariffs a hot-button issue. The Trump administration announced a 145% tariff rate on Chinese imports in April, though some tech hardware products received temporary exemptions.

Amazon found itself in the political crosshairs when it denied reports it planned to itemize tariff costs on customer orders. The White House had warned such a move would be considered “hostile and political.”

AI Investments Power Long-Term Strategy

Despite short-term market challenges, Amazon continues to bet big on artificial intelligence across its business empire. The company’s multi-pronged approach to AI spans several key business units.

Amazon Web Services (AWS) remains the cornerstone of Amazon’s AI strategy. With a commanding 30% market share in cloud computing, AWS outpaces competitors Microsoft Azure (21%) and Google Cloud (12%).

AWS offers crucial tools like Amazon SageMaker and Amazon Bedrock that help businesses build and deploy AI applications without starting from scratch. This “pick and shovel” approach positions AWS as essential infrastructure for the AI gold rush.

The cloud division generated an impressive $107.6 billion in revenue in 2024, growing 19% year-over-year. That’s more than the combined 2024 revenue of McDonald’s, Visa, and Starbucks.

Amazon’s diverse business portfolio creates unique opportunities for AI integration. From e-commerce to advertising, entertainment, and healthcare, each segment stands to benefit from AI enhancements.

Doubling Down on Capital Expenditures

Amazon’s financial muscle allows it to make massive bets on future technology. In Q4 2024 alone, the company spent $26.3 billion in capital expenditures, with much of it directed toward AWS AI infrastructure.

This spending pace is expected to continue throughout 2025, potentially exceeding $100 billion for the year according to Amazon’s chief financial officer. Few companies can match this level of investment.

The heavy spending demonstrates Amazon’s commitment to maintaining leadership in the AI race. However, these investments will take time to fully pay off.

Amazon’s stock performance reflects both the excitement and uncertainty around its strategy. After surging more than 160% from early 2023 through the end of 2024, AMZN shares have retreated about 16% so far this year.

Analysts remain largely positive on Amazon’s long-term prospects despite near-term headwinds. For investors nervous about current market volatility, a dollar-cost averaging approach might offer a smoother entry point.

Amazon closed at $184.42 on Wednesday, down 1.6% for the session. The company will provide updated guidance for Q2 during today’s earnings call, with analysts currently projecting revenue of $161.2 billion and earnings per share of $1.38.

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