Amazon – Navigating the Tariff Jungle

Amazon’s ecommerce (retail sales) marketplace business aims to offer the broadest possible selection at the lowest possible price to customers. This strategy has enabled Amazon to gain significant market share over the last two decades. 

Last week, Amazon released their Q1 2025 results, revealing a revenue of $155.7 billion, up 9% year over year, and an operating income of $18.4 billion, up 20% year over year. Sales in North America increased by 8% to $92.9 billion, while the international segment generated $33.5 billion, up 5% year over year. Amazon Web Services (AWS), Amazon’s cloud and AI business, generated $29.3 billion in revenue, up 17% year over year. Despite AWS generating the lowest revenue among all business segments, its operating income accounted for over 60% of the company’s operating profits. 

This quarter however has not yet reflected the full impact of the trade wars. Amazon has warned that tariffs could significantly impact their business. It is estimated that a quarter of all products sold on Amazon’s retail business are sourced from China. Currently, tariffs on goods imported from China to the US stand at 145%. Amazon noted that they have over 2 million sellers on their marketplace. While some sellers may pass the entire cost onto customers, others might absorb some or all the tariff costs to gain market share.  

Amazon is not solely an ecommerce marketplace. The company boasts an extremely profitable and growing cloud and AI business. Additionally, Amazon has an advertising business that has generated just under $60 billion in the last four quarters. The company plans to spend about $100 billion in capital expenditures, primarily directed towards further building out their AI capabilities.  

Due to their size and wide-reaching platform, Amazon is in a relatively strong position to weather the tariff storm and potentially emerge stronger once the tariff dust settles.