Consumer
Amazon: AI Powerhouse Driving Margin Transformation, Retail in Tariff Crosshairs
Amazon is building an AI powerhouse in AWS, with the segment becoming an increasingly large driver of Amazon’s earnings power despite contributing just one-sixth of Amazon’s revenue. Management remains committed to continuously expanding AI offerings and expanding GPU capacity to meet demand, seeing long-term tailwinds to its AI growth story. E-commerce remains Amazon’s bread-and-butter, but it has now found itself caught in the crossfire of fluctuating tariff policy, being quite heavily exposed to China. Meanwhile, AWS has helped drive strong expansion in Amazon’s margins with operating profit up 61% YoY to a record $21.2 billion. With that said, this previously bulletproof segment is also exposed to the trickle-down effects of tariffs as cloud customers exposed to China will likely cut their budgets in response. Mizuho believes this could be up to 50% of cloud customers.
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