Amazon’s Q2 Earnings Beat Expectations — So Why Did Shares Drop Over 4% After Hours?

TradingKey - Amazon (AMZN) released its fiscal second-quarter 2025 earnings report, delivering strong results across key metrics — showcasing solid fundamentals and accelerating progress in its AI transformation. Despite the beat, the stock fell more than 4% in after-hours trading, reflecting mixed investor sentiment.

The company reported Q2 net sales of $167.7 billion, a 13% year-over-year increase, surpassing the consensus estimate of $162.15 billion. Revenue growth remained robust at 12% on a constant-currency basis. North America and International segments grew 11% and 16% respectively, while AWS revenue rose 17.5% to $30.9 billion, demonstrating continued resilience.

[Source: Amazon Q2 2025 Earnings Report, ir.aboutamazon.com]

On the profitability front, Amazon posted net income of $18.2 billion ($1.68 per share), a 35% increase from $13.5 billion in the same period last year. AWS remained the profit engine, contributing over half of total operating profit — $10.2 billion — despite increased investment across the business.

CEO Andy Jassy emphasized that AI is now being deeply integrated into Amazon’s core products and operations. This includes the upgraded Alexa+, AI-powered shopping agents, the Kiro development toolkit, and the AgentCore model framework — marking a shift from AI as a vision to AI in action.

However, a notable concern emerged in cash flow: free cash flow dropped sharply to $18.2 billion (down from $53 billion a year earlier), raising questions about capital efficiency amid the company’s heavy investments in infrastructure and AI.

While revenue and earnings exceeded expectations, investors appear cautious about the sustainability of Amazon’s valuation and the timeline for returns on its massive AI investments. This skepticism — combined with signs of moderating cloud growth and intensifying competition in AI — may explain the post-earnings sell-off.

As AWS enters a more mature phase and the AI race heats up, Amazon must continue proving that its “post-cloud” growth story is not just promising, but executable at scale.