Amazon (NASDAQ: AMZN ) stock was trending lower on Friday after the e-commerce and cloud computing leader reported mixed earnings results.

The first quarter earnings themselves were solid, beating estimates. However, the outlook was a bit cloudy and below what analysts had anticipated.

Amazon saw net sales jump 9% in Q1 to $155.7 billion, which beat estimates of $155.1 billion.

Net income soared 64% to $17.1 billion, or $1.59 per share. This soundly beat estimates of $1.36 per share. The earnings were boosted by a one-time pre-tax gain of $3.3 billion related to its investment in Anthropic.

“We’re pleased with the start to 2025, especially our pace of innovation and progress in continuing to improve customer experiences,” Andy Jassy, president and CEO, Amazon, said, citing the rollout last quarter of the next-generation Alexa+ AI assistant.

But investors seem more focused on what’s ahead and how tariffs may impact Amazon.

AWS Misses Estimates

Amazon has three main business lines, North American sales on its e-commerce platform, international e-commerce sales, and Amazon Web Services (AWS), it’s market-leading cloud computing platform.

In North America, sales were up about 8% to $92.9 billion, while they rose 5% internationally to $33.5 billion.

While sales are high, these businesses generated less operating income because of the higher transaction costs. North America operating income was up 16% to $5.8 billion while international operating income rose 11% to $1.0 billion.

The cash cow is AWS, which saw net sales rise 17% to $29.3 billion, while operating income jumped 22% to $11.5 billion.

However, the AWS sales numbers fell short of estimates, which called for $30.9 billion in revenue, according to Reuters. The growth rate also pales in comparison to the 33% growth its closest cloud competitor, Microsoft (NASDAQ: MSFT ) Azure saw in Q1. This may have been a concern to some investors.

AWS is still the leader with a market share of 31%, but Microsoft at 21% and Google (NASDAQ: GOOGL ) at 12% have closed the gap in recent years.

Tariffs Cloud Outlook

The bigger concern among investors is Amazon’s second quarter outlook. The company is calling for net sales of between $159.0 billion and $164.0 billion, which would be 7% and 11% year-over-year growth. This guidance anticipates an unfavorable impact of approximately 10 basis points from foreign exchange rates.

The sales growth was roughly in line with estimates at the midpoint, but the projected operating income of $13.0 billion to $17.5 billion fell short of estimates. It would also only be up 4% year-over-year at the midpoint.

The guidance comes with a disclaimer that it is subject to “substantial uncertainty,” due to tariffs and other factors, which Jassy addressed on the earnings call.

“Obviously, none of us knows exactly where tariffs will settle or when,” Jassy said on the call. “We haven’t seen any attenuation of demand yet. To some extent, we’ve seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact. We also have not seen the average selling price of retail items appreciably go up yet.”

Exposure to China

Amazon has significant exposure to China, which was hit hardest by the tariffs. In a research note, UBS analyst Stephen Ju estimated that roughly 50% of products sold on Amazon will face a tariff-related price increase, reported Yahoo.

There were news reports this week that Amazon would break out the additional tariff costs for consumers to see, but Amazon denied that was case, after the Trump Administration objected to any such move.

Jassy added that Amazon is closely monitoring tariffs and planning for various outcomes as it tries to keep prices low.

“It’s hard to tell what’s going to happen with tariffs right now,” Jassy said on the call. “It’s hard to tell, where they’re going to settle and when they’re going settle … There’s maybe never been a more important time in recent memory than trying to keep prices low, which we’re heads down, pretty maniacally focused on.”

Several analysts lowered Amazon’s price targets slightly after earnings, but most still rate the stock as a buy with a median target of $240 per share. That would be 26% higher than the current price. But after Q1 earnings, expect that price target to drop a bit.

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