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Amazon (NASDAQ:AMZN) navigates a mixed earnings season with a softer Q2 outlook and fresh U.S. tariff worries, yet top analysts say Amazon's shares still look undervalued.
The e-commerce giant reported first-quarter net sales of $155.7 billion, up 9% year-over-year (10% ex-FX), with North America sales of $92.9 billion (up 8%), international revenue of $33.5 billion (up 5%/8% ex-FX) and AWS revenue of $29.3 billion (up 17%), while operating income climbed to $18.4 billion and adjusted EPS topped estimates at $1.59 versus $1.36.
Despite a 19% jump in ad revenue to $13.9 billion and a 7% rise in third-party seller services, Amazon guided Q2 net sales of $159 billion$164 billion and operating income of $13 billion$17.5 billionboth below consensusknocking shares down roughly 3% in after-hours trading; operating cash flow rose 15% to $113.9 billion on a trailing twelve-month basis, underpinning ongoing capex spend.
On the call, CEO Andy Jassy said customer demand remains robust despite U.S. tariff headwinds and outlined plans to shift more seller inventory to U.S. centers to manage costs, emphasizing price optimization and supply-chain resilience to protect margins. He also underscored continued Prime membership growth and said the company would lean into targeted price promotions to support volume.
Analysts held fast: Bank of America's Justin Post lifted his price target to $230 from $225, citing Amazon's core stability and valuation discount to peers like Walmart (NYSE:WMT), while Morgan Stanley's Brian Nowak kept a $250 target, flagging logistics scale and generative AI leadership as long-term profit drivers.
They also noted trailing free cash flow dipped to $25.9 billion from $50.1 billion amid heavy infrastructure investments and that shares are down 13% year-to-date versus a 4.7% S&P 500 drop, deepening the valuation gap for opportunistic buyers, and they highlighted improving ad margins as advertising revenue now contributes over 20% to segment operating income.
Investors should note that analysts' renewed targets and strong segment performance underscore Amazon's capacity to absorb tariff costs and deliver sustained growth. The stock's recent volatility may present an entry point for investors eyeing long-duration growth exposure with some near-term risk hedged by Amazon's defensive retail footprint.
Markets will now look to Amazon's Prime Day performance in mid-July and any progress in U.S.-China trade talks for fresh directional cues.
This article first appeared on GuruFocus.