Amazon Price Target as Trump Tariff Update Adds Pressure

Coming off of Thursday night’s June quarter earnings report, our shares of Amazon AMZN are under pressure on Friday morning, which is being amplified by revised tariff orders from the Trump administration that are weighing on the overall market.

While Amazon’s results for the reported quarter topped top- and bottom-line consensus forecasts, as we see it, two issues are weighing on the shares: the company’s profit guidance for the current quarter and the slower rate of cloud revenue growth in the June quarter compared to Alphabet GOOGL and Microsoft MSFT. Like many other stocks, following the strong run in AMZN shares of late, more than a few are going to be underwhelmed by those developments. But what is underwhelming to some can bring opportunity. Let’s discuss…

Management’s guidance for the current quarter calls for revenue between $174 billion and $179.5 billion, up low double-digits year over year, and ahead of the $173.2 billion consensus. However, operating income guidance calls for $15.5 billion to $20.5 billion, which at the midpoint points to modest improvement compared to $17.4 billion for Q3 2024. It also falls short of the $19.2 billion posted in Q2 2025 and the $24.5 billion figure the market was expecting for the current quarter.

In the past, we’ve seen the market focus on management’s overly conservative profit guidance in the past only to see Amazon deliver better than expected results. We also understand Amazon’s playbook to invest today to drive greater business down the road, and that’s the case for Amazon Web Services (AWS) as well as its digital retail business.

For example, Amazon continues to focus on improving delivery times, something that should further improve Amazon’s competitive positioning against brick-and-mortar retail. On the earnings call, management shared that over the last year, Amazon delivered 30% more items same day or next day than the prior year, and it’s investing to expand that capability to more than 4,000 smaller cities, towns and rural communities by the end of the year, compared to more than 1,000 today. We are inclined to patiently reap the benefits of these investments that should drive revenues, especially as we head into the holiday shopping season and beyond.

We also know AWS continues to be capacity-constrained, and there is a degree of lumpiness in the business from quarter to quarter. Much like we’ve seen with Microsoft, as Amazon adds cloud and data center capacity, we should see that business re-accelerate in the coming quarters and margins improve. Boosting our confidence in that was the continued increase in backlog levels for AWS to $195 billion exiting June, which was up 25% year over year. We’d also note that there was a re-acceleration in backlog growth compared to 20% in the March quarter.

Given the influence of AWS on Amazon’s overall profitability, that improvement should drive overall margin improvement in the coming quarters. Longer-term, the ongoing shift in enterprise spending in IT toward cloud from on-premise spending, that currently accounts for the bulk of IT spending, bodes well for AWS, especially as AI adoption accelerates.

During the earnings call, CEO Andy Jassy commented that the $31.4 billion in capex spending during the June quarter will be “reasonably representative of our quarterly capital investment rate for the back half of this year.” That implies an incremental $7 billion in spending compared to 1H 2025, which brings another reason to be bullish on Nvidia NVDA but also Marvell MRVL shares. As it relates to Marvell, Jassy commented Amazon’s Trainium 2 AI chip is “starting to lay in capacity in larger quantities,” and development has begun on its next-generation chipset.

Looking back, when Amazon has leaned in and invested in its businesses, the subsequent market reaction that has led to a selloff in AMZN shares has led to nice pick-up points for patient investors. It’s also fair to say that Amazon’s margin potential is greater this time around as its near-term investment bears fruit. We can make that argument given ongoing cost reduction efforts, but also the growing influence of its high-margin advertising business, which generated $15.7 billion in revenue during Q2 2025, up just shy of 50% over the last two years. That faster rate of growth helps explain the improved margins at Amazon’s North American and International segments, as does the growing use of AI to drive productivity gains.

So, while the market reacts to those developments and places AMZN shares in the “show me” box that Microsoft shares have emerged from, we’ll take the longer-term view and reiterate our $260 price target for AMZN shares.

The pullback we are seeing in the shares today gives us ample room to maintain our One rating, but our message to subscribers tempted to pick up AMZN shares on Friday is to wait and let them settle out over the coming days. Part of our thinking is to let those two items wash over the shares completely but also let the same happen with the latest Trump tariff headlines. That should make a nice risk-to-reward tradeoff in the shares even better. While waiting, we’ll be watching support levels near $209 and again at $204.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long AMZN, GOOGL, MSFT, NVDA and MRVL.