Amazon Stock (AMZN) Good Growth and Good Value in Q2 2025

Amazon.com (NASDAQ:AMZN) continues to capture attention among investors, not only for its dominant positioning in e-commerce and cloud computing, but also for its ability to deliver solid growth alongside improving profitability. In this article we will dive into Amazon recent earnings, stock performance & valuation, growth potential, and the risks investor should consider.

About Amazon

Amazon was founded in 1994 by Jeff Bezos. It began as an online bookstore but quickly expanded into a broad range of retail goods. Over the years, Amazon has diversified into many lines: the Amazon Web Services (AWS) cloud business, digital streaming, advertising, third-party seller services, subscription services (e.g. Prime), and physical grocery (Whole Foods, etc.). Its scale, logistics network, and innovation (including in fulfillment, AI/ML, etc.) are major competitive advantages.

Amazon Financial Performance

Amazon’s second-quarter 2025 results underscore strong financial momentum. Revenue for the quarter reached $167.7 billion, up 13.33% from $147.97 billion a year earlier, while earnings per share (EPS) climbed to $1.68, a robust 33.33% increase from $1.26 in Q2 2024. On a trailing-twelve-month (TTM) basis, revenue grew 10.87% to $670.04 billion from $604.33 billion, and EPS surged 56.77% to $6.56 versus $4.18 a year earlier. Free cash flow per share (TTM) decreased 72.47% to $1.25 from $4.54 a year ago, reflecting heavy investments. Profitability remains solid, with a gross profit margin of 49.61%, net margin of 10.54%, and free cash flow margin of 2.01%. Returns are equally impressive, as return on assets stands at 7.7% and return on equity at 24.77%, supported by a conservative debt-to-equity ratio of 0.48. 

Over the past five years, Amazon has grown revenue at a 13% CAGR and net income at 30.5%, while free cash flow has declined by 13.5%. Although free cash flow declined this year, Amazon’s overall financial performance has grown consistently over the past five years.

Amazon Fiscal 2025 Financial Forecast

Looking ahead, analysts forecast 2025 revenue of $708.02 billion, a 10.98% increase from 2024’s $637.96 billion, and project non-GAAP EPS of $6.64, about 20% higher than 2024’s $5.53. Wall Street sentiment remains bullish, with a Strong Buy rating, an average price target of $263.74 representing roughly 13.96% upside, and a high estimate of $306, implying potential gains of more than 32% from current levels.

AMZN Stock Price Performance and Valuation

At the time this article was written the stock was trading at $231.43 per share.  The stock is climbing 25.1% over the past year, comfortably outperforming the S&P 500’s 17.4% rise in the same period. Over a longer horizon, the stock is up 56.6% over five years, which underperform the S&P 500’s 99.8% increase, but this made the valuation lower. 

From a valuation perspective, Amazon currently trades at a price-to-sales (P/S) ratio of 3.6 on a trailing twelve-month basis and a forward P/S of 3.44, alongside a non-GAAP price-to-earnings (P/E) ratio of 34.78 and a forward P/E of 34.38.. The price-to-free-cash-flow ratio of 183.09 highlights a high valuation based on its free cash flow.

Based on Fiscal.ai data, if we look at the valuation since 2023, the forward P/S is above the average, while the forward P/E is below the average. Although Amazon’s forward P/E is still quite high, it still looks reasonable as Amazon’s net income has grown at a 30% CAGR over the past five years.

Amazon Growth Potential

Amazon growth prospect remains robust, driven by several factors.

• AWS Cloud Dominance and AI Infrastructure Leadership
  Amazon Web Services (AWS) delivered strong Q2 2025 results, generating $30.9 billion in revenue, up 17.5% year-over-year, and contributing $10.2 billion in operating income. AWS commands a 30% global cloud market share, well ahead of Microsoft Azure at 20% and Google Cloud at 13%. The segment accounts for over half of Amazon’s total $19.2 billion operating income, highlighting its role as the profit driver. Amazon is investing more than $100 billion in 2025 capital expenditures, focusing heavily on expanding AI infrastructure and data centers. This significant investment positions AWS to meet growing demand for generative AI services, supported by a $195 billion service backlog growing 25% annually. Despite capacity challenges like power and chip shortages, AWS’s leading infrastructure and AI service offerings such as Amazon Bedrock and Nova create considerable long-term growth potential in the enterprise AI market.
• Advertising Business Acceleration and Platform Monetization
  Amazon's advertising services generated $15.7 billion in Q2 2025 revenue, up 22% year-over-year, outpacing Amazon’s overall 13% revenue growth. This segment now accounts for 9.36% of total revenue, nearing the 10% milestone for the first time. The platform reaches over 300 million U.S. consumers across retail, Prime Video, Twitch, Fire TV, and live sports programming such as NFL, NASCAR, and NBA. Strategic partnerships with Roku extend advertising reach to 80 million households across Fire TV and Roku platforms, expanding beyond Amazon's core. Amazon’s full-funnel advertising connects brands with consumers at multiple touchpoints, from discovery to purchase. This growth reflects Amazon’s strategic move to monetize every part of its ecosystem, increasing ad inventory across search results and accelerating expansion into connected TV and video streaming advertising markets, powered by innovations in AI-driven targeting and demand-side platform (DSP) tools.
• International Segment Profitability Transformation
  Amazon's International segment saw a remarkable profitability turnaround in Q2 2025, with operating income soaring 448% year-over-year to $1.5 billion and revenue rising 16% to $36.8 billion. This surge highlights that Amazon's international investments are delivering substantial returns as operations outside North America scale up and become more efficient. Revenue growth, excluding foreign exchange effects, was 11%, reflecting strong global demand. Key to this success are infrastructure investments, including 31 million square feet of new warehouse leases signed in 2024 up from 19 million in 2023, surpassing pre-pandemic levels. Amazon is also investing $4 billion to expand its rural delivery network, increasing its reach in underserved markets and strengthening its position vs. local competitors. These milestones mark a pivotal shift with international operations contributing significantly to Amazon's overall profitability and sustaining strong revenue momentum.

Risks to Consider

While Amazon looks like a compelling opportunity, we should be mindful of potential risks.

• Supply Chain Challenges
  Amazon is under investigation by the UK’s grocery watchdog for allegedly delaying payments to small suppliers, potentially violating industry rules that require timely payments. This has caused disruption among UK retailers and suppliers, who face increased financial risks and unexpected costs. If found guilty, Amazon could face fines up to 1% of its UK revenue. Though Amazon says it is cooperating and improving payment practices, the issue poses risks to its supply chain and business relationships if unresolved.
• Legal and Regulatory Risks
  Amazon faces multiple lawsuits and regulatory scrutiny, including a record €746 million fine imposed for breaching data protection rules by improperly processing personal data for advertising. The FTC and other regulators are investigating Amazon for compliance failures, including withholding documents. These issues reflect deep regulatory challenges for Amazon’s business practices, risking further fines, restrictions, or operational disruptions if unresolved.
• Economic and Tariff Exposure
  Amazon faces risks from macroeconomic slowdowns and tariff disruptions, which can affect consumer spending and increase costs. Tariffs on imports, especially from China, raise product prices and pressure profit margins. Additionally, ongoing trade tensions and inflation concerns may weaken global demand, leading to earnings uncertainty. These factors create challenges for Amazon’s growth and valuation, as a potential recession and fluctuating currency rates add further unpredictability to its financial outlook.

Read More: TransMedics Stock (TMDX) Strong Growth and Good Value in Q2 2025

Conclusion

Amazon’s Q2 2025 results highlight a company combining robust growth with solid fundamentals. Revenue and earnings continue to accelerate, margins and returns remain healthy, and analysts project double-digit growth ahead. Although valuation multiples such as P/E and P/FCF are elevated, they reflect Amazon’s dominant market position, strong cash generation potential, and ongoing expansion in high-margin segments like AWS and advertising. For long-term investors seeking sustained growth and market leadership, Amazon’s stock still offers an appealing opportunity despite the premium pricing and typical big-tech risks.