Amazon's AI-Powered AWS, Efficiency Gains, And Consumer Demand Fuel Bullish Q2 Outlook

Amazon.com (NASDAQ:AMZN) is poised to potentially outperform market expectations in its July 31 second-quarter earnings report, driven by a combination of robust U.S. retail sales, advantageous foreign exchange rates, and accelerating demand for its artificial intelligence-related services through Amazon Web Services (AWS).

Strong consumer spending and ongoing efficiency gains in its e-commerce operations are also contributing to a positive outlook for the tech giant. Reinforcing this positive sentiment, Bank of America Securities analyst Justin Post maintained Amazon.com (NASDAQ:AMZN) with a Buy rating and raised the price forecast from $248 to $265.

Post raised its second-quarter estimates for the company, citing stronger-than-expected U.S. retail data, favorable foreign exchange (FX) movements, and rising AI-related demand via Anthropic. The analyst forecasted second-quarter revenue of $164 billion, exceeding Wall Street’s consensus of $162 billion.

Also Read: Amazon’s AI-Powered Cost Cuts, Labor Gains And Record Prime Day Drive Analyst’s Bullish Outlook

He expects Amazon Web Services (AWS) to grow 16.5% year-over-year, slightly below the first-quarter’s 16.9% but in line with Street projections of 17%. However, Post noted that robust AI demand and accelerating AWS infrastructure investments will drive growth reacceleration in the second half of the year.

The analyst projects $17.8 billion in second-quarter profit, above the consensus estimate of $17.0 billion and the high end of Amazon’s own guidance of $17.5 billion.

Key drivers include resilient consumer spending, signs of acceleration in e-commerce trends, and FX benefits, especially with the euro up 5% year-over-year (Y/Y) and 8% quarter-over-quarter (Q/Q) against the dollar, potentially delivering a 130bps FX tailwind vs. the Street’s modest 30bps estimate, he noted.

In North America Retail, aggregated BAC credit/debit card data and Bloomberg Second Measure point to a 4-point acceleration in sales growth versus the first quarter, Post noted. The analyst said this sets the stage for Amazon to beat Street expectations by over 2% in the region. International Retail could benefit from FX trends, as the Street models only offer a modest boost.

Amazon’s guidance for the third quarter is expected to range between $169 billion and $174 billion (vs. Street at $172.8 billion) with GAAP EBIT projected between $14.0 billion and $18.0 billion (Street at $19.4 billion), Post noted. He suggested Amazon’s historical conservatism could result in cautious guidance, but if second-quarter results show substantial upside, the third-quarter outlook could surprise higher.

Post also highlighted reports of AWS job cuts, which may support margin expansion in the second half. The analyst estimates second-quarter AWS operating margins at 36.0%, slightly above the consensus of 35.3%, though down 3.5 points from the first quarter due to higher stock-based compensation.

He further noted that AWS capex spending is scaling rapidly, up 38 points Y/Y, now accounting for 70% of Amazon’s capex, signaling a ramp in infrastructure buildout that should alleviate previous supply constraints and support future growth.

Post said positives that could boost investor confidence included solid second-quarter retail performance from resilient consumer demand, potential third-quarter boost from a longer Prime Day, retail margin leverage from hiring freezes and cost discipline, AWS revenue acceleration tied to increasing AI and chip demand and improved operating efficiency and tax savings from the Big Beautiful Bill, which could add $6.4 billion in incremental cash tax benefits between 2025–2027.

Despite trading at 13.4 times 2026 EV/EBITDA, Amazon remains below its 10-year average of 16.5 times, the analyst said, suggesting potential for multiple expansion if growth momentum holds. Upcoming results from Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) may also influence sentiment ahead of Amazon’s report, Post noted.

Post projected second-quarter revenue of $163.92 billion and EPS of $1.40.

Price Action: AMZN stock is trading higher by 0.26% to $228.05 at last check Wednesday.

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