Amazon earnings preview: can AWS help the stock catch up with tech peers?

E-commerce giant Amazon is set to report its third-quarter 2025 earnings later today, and investors and analysts will be closely watching for signs of acceleration in its cloud-computing division, Amazon Web Services (AWS).

The company’s shares have risen only about 4% this year, far behind its Magnificent 7 peers, and analysts believe the upcoming report could offer the boost investors have been waiting for, as expectations hinge on cloud and AI momentum.

According to FactSet, Wall Street expects Amazon to post revenue of $177.9 billion and adjusted earnings per share of $1.57 for the September quarter.

AWS is forecast to generate $32.5 billion in revenue, reflecting 18.1% growth from the same period last year.

Amazon has outperformed revenue expectations in seven of the last eight quarters, beating estimates by an average of 1%.

In the June quarter, revenue grew 13.3% year-on-year to $167.7 billion, supported by strong advertising and e-commerce performance.

Analysts see potential upside in cloud and advertising

While AWS remains the linchpin of Amazon’s profitability, analysts are optimistic about its broader business momentum.

UBS analyst Stephen Ju reiterated his buy rating on the stock this week, raising his price target to $279 from $271.

"We continue to see the potential for upside across Amazon's business segments, including e-commerce, cloud, advertising, and Kuiper / low earth orbit satellites," he wrote.

He added that AWS revenue could strengthen in the fourth quarter and early 2026 as Amazon expands its data center capacity.

However, he cautioned that customer spending trends appear “less robust” than for rivals Microsoft Azure and Google Cloud.

Bernstein analyst Mark Shmulik shared a similar view, predicting AWS growth could exceed 20% by early 2026 as demand for AI workloads gains traction.

“We expect a strong visible acceleration for AWS by the end of the year,” Shmulik wrote.

Analysts also believe that the third quarter could mark the beginning of meaningful AI monetization within Amazon’s ecosystem—boosting both operating profit and free cash flow.

Cloud outage, job cuts and regulatory headwinds

Despite positive expectations, recent developments could cloud the near-term outlook.

On October 20, AWS suffered a major outage that disrupted thousands of apps and services globally.

Investors will be looking for updates on customer impact, service backlogs, and any compensation-related costs.

Adding to this, Amazon announced on Tuesday that it will cut about 14,000 corporate roles to streamline operations and reduce bureaucracy.

The company also recently agreed to pay $2.5 billion to settle charges with the Federal Trade Commission over its Prime subscription practices.

Analysts expect this to weigh on operating income guidance for the fourth quarter.

Retail and advertising segments remain bright spots

Beyond the cloud division, Amazon’s retail and advertising arms are showing resilience.

The advertising business, which has become one of Amazon’s most profitable segments, continues to expand rapidly as brands allocate more of their budgets to the platform.

UBS’s industry checks suggest this trend could accelerate into the second half of 2025.

Meanwhile, the e-commerce segment is seeing gradual improvement in margins, driven by gains in logistics efficiency and delivery infrastructure.

Amazon’s same-day grocery delivery service, now expanding to 4,000 smaller US towns and cities, has helped strengthen its domestic retail footprint.

Melissa Otto, head of research at S&P Global Visible Alpha, said consumer spending trends will play a crucial role in shaping Amazon’s holiday outlook.

"The way the company guides and what color they give around holiday spending will be very important," Otto told MarketWatch.