Latest / Retail Media Breakfast Club / Amazon Q2 Earnings: Best Of The Analyst Recaps
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- Amazon Q2 Earnings: Best Of The Analyst Recaps === [00:00:00] Amazon's Q2 2025 earnings landed with a thud on Wall Street, despite the company beating revenue expectations. I've been spending the last couple of days listening to the smartest voices [00:00:15] in retail, break down these results, and today I'm sharing their insights on three critical themes. [00:00:22] Amazon's advertising juggernaut. Retail resilience and AI's impact on the future [00:00:30] of commerce. Let's jump in. [00:00:33] So let's first start with advertising, here's Jason Goldberg from the Jason and Scott Show, putting this in perspective. [00:00:42] jason: Well, obviously this has been a. Big story to [00:00:45] Amazon for a long time, and it continues to, to be one of the bright stars in Amazon growing much faster than the overall business. And this quarter they, they did 15.7 billion, which was a beat versus analyst expectations. And so the, the year over year [00:01:00] growth was like 23%, 22.9%. That's still growing, you know, super fast and, and well in excessive of, uh, wall Street's expectations, which were like 17%. [00:01:11] [00:01:12] [00:01:12] But here's where it gets interesting for [00:01:15] brands. While Prime Day 2025 actually fell in Q3, so it's not captured in these Q2 results. Scott Winger on this episode reveals what a lot of sellers experience during the [00:01:30] lead up that advertising commitments became almost mandatory to access key promotional programs. [00:01:38] [00:01:39] [00:01:39] scot: Yeah. And on, on the ad topic. Everyone I talked to about Prime Day said Amazon was pushing ads so [00:01:45] incredibly hard that it was almost a gate for you had to buy, make, commit to a big ad buy before you could even get into the programs and stuff. So I suspect we may actually see this one accelerate, uh, again into Q3 because [00:02:00] the Amazon's really leaning in and, yeah, maybe I would, I [00:02:03] jason: would just say like, whether Amazon's trying to lean in or not. Like it's almost inevitable because of their assortment, right? Like you're, you're a billion items now. No one's ever gonna organically find any of your items. And so [00:02:15] ads are the only path to discovery for all, all of the sellers on the platform. [00:02:19] [00:02:20] It's not a new concept to say that Amazon advertising is a toll booth for selling on Amazon, . But we're still seeing that kind of play out [00:02:30] in reality. Moving on, let's talk about retail resilience, inventory positions, tariffs, and how all of those things shaped consumer behavior. [00:02:41] Amazon's core retail business [00:02:45] showed a lot of strength. Last quarter. Amazon's global GMV growth of 11% significantly outpaces the broader e-commerce market's. 7% growth. That means that Amazon, despite it [00:03:00] being so big, is still gaining market share. [00:03:03] Catherine Black, a partner at consulting firm Kearney offered crucial context about Amazon's competitive position in this interview on Bloomberg. Let's listen. Okay. [00:03:14] [00:03:15] Katherine Black: There's really only one retailer that's outgrowing the natural market growth in e-comm, and that's Walmart. They're on a much smaller base, and for them, they had a lower end customer to begin with. And their e-commerce business is bringing in a new [00:03:30] customer, a higher end, less price sensitive customer. [00:03:33] Amazon's customer traditionally has been that higher income household, absolutely. And they've been competing against things like club that in the past didn't even have an e-comm offering. [00:03:42] [00:03:44] And I think this is [00:03:45] actually a really interesting point, [00:03:47] that this higher income customer base actually offers some insulation from economic pressures. [00:04:00] Did you know that 60% of shoppers abandoned carts when product info is wrong? Before you ramp up your ad spend, fix the shelf Acosta group's. Award-winning connected commerce crew [00:04:15] is trusted by brands like Coca-Cola and Sanofi to deliver critical content updates. [00:04:22] Acosta Group handles it all. Then layers on media buying. Learn about Acosta group's connected commerce capability [00:04:30] at Acosta Group and tell them Retail Media Breakfast Club sent you. That's A-C-O-S-T-A group [00:04:41] Another big piece of this retail resilience [00:04:45] story is the supply chain improvements that Amazon has been making over the last few quarters. Going back to the Jason and Scott show, Jason notes how a regional hub transformation has improved Amazon's [00:05:00] cost to serve. [00:05:01] [00:05:02] jason: For those of us that care mostly about retail, I would say like the supply chain discussion, you know, continues to roll along that, you know, the people are forgetting. About 18 months ago, they made this major transformation from a national [00:05:15] distribution system to a regional hub and spoke system, and they've been. [00:05:18] Claiming wild successes, both improving their service level by having faster delivery and more products available for faster delivery and improving their profitability and the [00:05:30] cost to serve going way down. And all of those trends continued this quarter. Improving their service levels nationwide for delivery and they're improving their cost to serve, which is beneficial to their margins. [00:05:41] [00:05:42] Now we finally get to the [00:05:45] topic of the year, tariffs. Amazon's messaging on this was notably calm, CEO Andy Jesse said on the earnings call that tariffs haven't dented demand or [00:06:00] driven up prices so far this year. Adding, if costs end up being higher, we will absorb them. [00:06:07] And not want to suffer fools, my friend and fellow podcaster, Scott Oshman [00:06:15] captures the corporate spin perfectly highlighting how Amazon is really downplaying potential tariff impacts on the merchants and sellers and vendors who have had to [00:06:30] deal with very erratic purchase order scheduling with Amazon, pulling forward inventory to get ahead of potential price increases and cutting a whole lot of purchase orders that. We're outside of that [00:06:45] forward bought plan. [00:06:47] Scott: Oh, this is spin zone, like 1 0 1, man. Hey, we are, we're good. Nothing to see here. Put the caution tape up. Nothing to see here, Andrew. No, we're fine. We're not really seeing prices [00:07:00] go up. [00:07:00] We're seeing great demand because there's only like two places in the world that people buy anymore for crying in the night. No, we're fine. Nothing to see here. It's gonna be all good, man. [00:07:12] [00:07:13] , his sarcasm highlights how [00:07:15] Amazon is really downplaying potential tariff impacts on the merchants and sellers and vendors who have had to deal with very erratic purchase order scheduling with Amazon, [00:07:30] pulling forward inventory to get ahead of potential price increases and cutting a whole lot of purchase orders that. [00:07:38] We're outside of that forward bought plan. [00:07:41] But beyond the tariff speculation, there's still [00:07:45] a shift happening in how consumers are actually shopping. Catherine Black from Kearney has spotted an interesting pattern here. [00:07:53] [00:07:54] Katherine Black: Yeah. I'll tell you more than any time I've seen in recent memory, a lot of consumers are watching price and [00:08:00] they're changing their behavior, but they're not stopping shopping. I would call it power buying. Where they're being very savvy and very selective about how they spend. [00:08:08] Mm-hmm. They are waiting for promotions and coupons. They're shifting to maybe a cheaper store or a cheaper brand to [00:08:15] manage their budget. And they're making decisions, but they're not stopping shopping. [00:08:18] [00:08:19] This shift to more strategic price conscious shopping behavior helps explain why Amazon's everyday essentials category is booming, and why [00:08:30] advertising has become even more critical. Brands need to capture these deal seeking moments when consumers are ready to buy. It also reinforces why Amazon's operational improvements in cost to serve are so crucial right [00:08:45] now. [00:08:45] Moving on to Amazon's AI ambitions, [00:08:50] the discussion on the earnings call about AI reveals both Amazon's ambitions and its challenges. Here's what Jason Goldberg [00:09:00] had to say. [00:09:01] jason: The worst sentence I've heard in the whole earnings report last night, by the way, Scott was there, I can't remember if it was a response to a question or it was part of some other answer, but Andy said that, when he was bragging about how much better Alexa [00:09:15] plus is than previous things. [00:09:17] And we, talked about this in the last podcast. It is excellent in a lot of ways. He mentioned that he could well imagine, a version of ads being in that at some point, which from a user [00:09:30] experience standpoint, was pretty disappointing for me to hear. Like, I think there's a bunch of things that are problematic about voice as a user interface for a lot of things. [00:09:36] And then once you add more interruption to the voice, I think it's potentially awful. [00:09:41] scot: Yeah, so it's gonna be interesting to watch that. I noticed they do have ads on [00:09:45] Rufus now, so Rufuss was already not very good and it already is like down a notch in my book because, [00:09:50] a really good example is to take some of these everyday essentials and that's where the ads are really just kind of like this fever pitch CPG type stuff. Yeah. This, like, I was getting these dog [00:10:00] dental things and I asked Rufuss about it and it did everything it could to sell me something else and not gimme the thing I wanted. [00:10:06] [00:10:07] Looking ahead, the expert consensus. Suggests Amazon faces a delicate balancing act. [00:10:15] Their advertising business prints money, but risks alienating the very customers that make the platform valuable. Their retail operations remain strong, but competitive pressures from Walmart and [00:10:30] potential AI disruptors still loom large for brands and retailers. [00:10:35] The message is clear. Amazon's platform is becoming more pay to play than ever, but it still remains indispensable for reaching [00:10:45] customers. The key is to understand these dynamics and plan accordingly, whether that means budgeting for increased ad spend, diversifying channel strategies, or preparing for an AI transformed shopping future where traditional [00:11:00] advertising may matter less