Amazon is facing the prospect of significantly higher costs for the products it sells on its e-commerce platform due to President Trump’s announcement of plans to enact various tariffs on imported goods from practically all of America’s trading partners. However, this is not a new concern for Amazon. The company is a diversified technology conglomerate, and not all its segments are directly affected by the trade tensions. One area that is not directly affected is Amazon Web Services (AWS), the company’s cloud platform. AWS offers hundreds of cloud solutions to help businesses transition into the digital age, whether they need basic data storage, video streaming capabilities, or complex software development tools. It’s the largest platform of its kind in the world, and it’s using its immense scale to move into artificial intelligence (AI), which Amazon CEO Andy Jassy calls a once-in-a-lifetime business opportunity. AWS is tackling the three core layers of AI – data center infrastructure, large language models (LLMs), and software. The company has designed its own data center chips, called Trainium, to help reduce its customers’ AI training costs by up to 40% from those charged by third-party suppliers.
“The data center is the backbone of the cloud, and we’re committed to making it faster, more powerful, and more cost-effective for our customers,”
said Andy Jassy, Amazon CEO. AWS has also developed its own family of LLMs called Nova, which can offer cost savings of 75% compared to models from other vendors on the AWS Bedrock platform. To cover the third layer, AWS has built a powerful virtual assistant called “Q.” It can write programming code to accelerate software projects, and it can help businesses analyze their internal data to uncover new opportunities to generate revenue. AWS generated a record $107.5 billion in total revenue during 2024, which represented just 16.8% of Amazon’s total revenue of $637.9 billion. However, AWS is highly profitable, so it accounted for more than half of the organization’s entire operating income of $68.6 billion.
- The platform’s quarterly revenue growth accelerated to 19% in the early stages of last year and stayed there.
- On May 1, Wall Street will want to see whether AWS built on that momentum in the first quarter of 2025 and whether management says its growing portfolio of AI services was a major contributor.
- E-commerce remains Amazon’s single largest source of revenue, but it operates on razor-thin profit margins, so the company has focused on improving its efficiency over the last couple of years.
Amazon’s e-commerce business operates on razor-thin profit margins, so the company has focused on improving its efficiency over the last couple of years. It divided its U.S. logistics network into eight distinct regions in 2023, which allows the company to stock different products in different fulfillment centers depending on their popularity in specific geographic locations. This means orders travel shorter distances to reach customers, which lowers costs and improves delivery times. Those adjustments contributed to significant earnings growth for Amazon last year. Unfortunately, tariffs threaten to undo its progress. As things stand today, tariffs will increase the cost of every product Amazon imports into the U.S. by at least 10%, and some products coming from China, specifically, are set to become a staggering 245% more expensive. **Wall Street Predicts Significant Earnings Growth in Q1**
Wall Street’s consensus estimate suggests Amazon could deliver $1.36 in earnings per share (EPS) during Q1, which would be a solid 38.7% increase from the year-ago period. AWS is likely to support the company’s earnings amid the global trade tensions, as are segments like digital advertising and video streaming, which aren’t directly subject to tariffs. **Amazon Stock Looks Like a Good Value Following the Recent Dip**
The 28% dip in Amazon stock from its record high has created an opportunity for investors to buy it at a very attractive valuation. It now trades at a price-to-earnings (P/E) ratio of just 31.1, which is a steep discount to its five-year average of 83. I’m not suggesting it will get back there because 83 is very high, but Amazon has always traded at a big premium to the Nasdaq-100 index, which currently sits at a P/E ratio of 27.1. If we look ahead to 2026, Wall Street expects Amazon to deliver $7.52 in EPS, which places the stock at a forward P/E ratio of just 22.9. Therefore, the stock would have to climb by 35.8% by the end of next year just to maintain its current P/E ratio of 31.1. **Long-Term Potential Remains Strong**
After all, Amazon has an incredible track record of success, which is why its stock has soared by a staggering 191,000% since it went public in 1997. One single quarter is unlikely to change its trajectory, so investors could earn a positive return over the long run whether they buy it ahead of next Thursday or wait until after the Q1 results are released. Amazon’s diversified business model, robust profitability, and strong long-term fundamentals make it a solid choice for investors looking to ride out the uncertainty of global trade tensions. With its cloud platform, AI initiatives, and other growth drivers, Amazon is well-positioned to navigate the challenges ahead and continue its upward trajectory.
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