Amazon Holds Ground as Cloud Growth Slows, Retail Moat Widens

Amazon (AMZN, Financials) remains dominant in e-commerce and logistics, but its top profit engineAmazon Web Servicesis losing momentum.

In Q2 2025, AWS posted $10.16 billion in operating income, accounting for more than half of Amazon's total. But with 17% YoY growth, it lags peers: Microsoft's Azure (+39%) and Google Cloud (+32%). Capital spending, meanwhile, is high$118 billion for 2025 vs. ~$8589 billion for rivals.

Investors are watching closely. The cloud unit's slower growth, lower margins, and rising costs have cast doubt on its ability to drive long-term earnings upside. Amazon's AI partnerships still trail Microsoft's OpenAI deal and Google's Gemini rollout.

On the retail side, Amazon's moat continues to deepen. With over 80% of U.S. households using Prime, and the launch of Amazon Autos and deeper grocery penetration via Amazon Fresh, its reach is expanding. Prime Video's exclusive content and European sports rights (e.g., UEFA Champions League) add stickiness.

Advertising revenue is quietly becoming Amazon's next engine. In Q2, it rose 22% YoY, outperforming broader ad market growth and supported by Amazon's scale across retail, streaming (Twitch), and logistics.

Amazon has also deployed over 1 million robots in its warehouses, helping drive margin expansion in its North American segment. It's not selling these robotics yet, but the internal impact is already clear.

Risks ahead include falling U.S. consumer sentiment, rising credit card debt, the end of the "de minimis" import tax exemption, and unclear China tariff policyall of which could squeeze margins and dampen retail growth.

Valuation-wise, Amazon trades at a premium to peers on a price-to-sales basis, but below its 5-year P/E average. Investors appear divided: is this a high-quality stock with upside or already priced for perfection?