The recent Amazon stock dip has sparked debate among investors after the company released its Q2 2025 earnings on July 31. Despite revenue and earnings per share beating analyst expectations, concerns about Amazon Web Services (AWS) losing market share and margin compression have sent shares of Amazon.com Inc. (NASDAQ:AMZN) lower.
This drop places Amazon in the company of Tesla Inc. (NASDAQ:TSLA) as one of the few “Magnificent 7” tech giants to decline after reporting quarterly results this earnings season. In contrast, Microsoft Corp. (NASDAQ:MSFT) and Meta Platforms Inc. (NASDAQ:META) rallied following upbeat AI-related growth updates.
Strong Q2 Revenue, Weak Guidance Spooks Market
Amazon reported Q2 revenue of $167.7 billion, beating Wall Street’s estimate of $162.09 billion. Earnings per share came in at $1.68, also topping forecasts. However, the guidance for Q3 disappointed. Revenue is expected between $174 billion and $179.5 billion—a healthy year-over-year growth—but operating income guidance between $15.5 billion and $20.5 billion trailed analyst expectations, with the midpoint falling short of the $19.48 billion consensus.
The company blamed macroeconomic uncertainties, including tariffs, trade policies, and recessionary fears, for its softer outlook. Such cautious guidance has become a pattern for Amazon over recent quarters, further shaking investor confidence.
AWS Performance Fuels Amazon Stock Dip
The primary reason behind the Amazon stock dip appears to be the underwhelming performance of its cloud unit, AWS. Although AWS posted 17.5% year-over-year revenue growth, its operating margins fell to 32.9%, down sharply from 39.5% in the previous quarter. Amazon attributed the margin decline to higher stock-based compensation, increased depreciation, and foreign exchange headwinds.
Even more concerning for investors is the possibility that AWS is losing market share. In the same quarter, Microsoft Azure and Google Cloud, operated by Alphabet Inc. (NASDAQ:GOOGL), posted revenue growth of 39% and 32%, respectively. Microsoft also disclosed for the first time that Azure’s annual revenue reached $75 billion, putting it at 65% the size of AWS.
Amazon CEO Andy Jassy defended AWS’s position, stating the company still holds a “significant leadership position” in the cloud market. However, he conceded that AWS growth has slowed at times compared to rivals. “Sometimes we grow faster, sometimes others do,” he said, emphasizing AWS’s focus on security and data privacy as key differentiators.
Analyst Response: Target Prices Raised Despite Dip
Despite the Amazon stock dip, analysts remain cautiously optimistic. Several major brokerages, including Bank of America, Piper Sandler, Rosenblatt, Barclays, and Susquehanna, raised their price targets on AMZN shares while maintaining their existing ratings.
Wedbush Securities Managing Director Scott Devitt rated Amazon’s Q2 a B+, noting that the earnings beat was solid, but AWS’s relative underperformance likely triggered the market’s reaction. He also highlighted Amazon’s trend of offering conservative guidance, which it often beats.
Should Investors Buy the Amazon Stock Dip?
From a valuation standpoint, Amazon stock currently trades at a forward P/E of 36.6x, a level that isn’t excessively high but not particularly cheap either. Investors are weighing this valuation against tariff uncertainty, AWS market share erosion, and the broader macroeconomic environment.
While some long-term investors may see this Amazon stock dip as a buying opportunity, caution is warranted. Near-term volatility remains a risk as inventory levels stabilize and geopolitical factors evolve. For those with a long-term horizon, the stock may still offer upside, but timing a short-term rebound could be challenging.
Bottom Line
The Amazon stock dip after Q2 reflects deeper concerns about AWS’s ability to maintain cloud dominance amid stiff competition from Microsoft and Google. While the business fundamentals remain intact for long-term investors, near-term uncertainties suggest it might be wise to wait for more clarity—or at least for a better price entry point.
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