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Shares of the company were down 2% to $1,931.76 in early trading.
While Amazon Web Services reported 37% growth, that was below what analysts were expecting. The company is also making expensive investments in shipping for its Prime members and is seeing increased international competition and regulatory challenges.
"Overall, the AMZN narrative has shifted back more toward top-line growth in 2019 as we expected, but the magnitude of acceleration & accompanying investment spend are both bigger than we projected," J.P. Morgan analyst Doug Anmuth said.
"Still, we believe investors will prefer the trade-off of profits for growth & we like how AMZN continues to raise the bar in online retail."
The earnings report might have presented conflicting stories, but it's still a buying opportunity, analysts at Evercore ISI said.
"While AMZN's investment thesis was migrating to one of growing profitability from strong top-line growth, we think this print highlights that AMZN's revenue growth acceleration story is far from dead," they said.
"In sum, though the 3Q19 operating income guidance was somewhat disappointing, we would be buyers of any weakness as long as top line trends remain intact."
Amazon's results were enough, for now, for analysts at Citi.
"All told, we again find these results as good but not great," they said.
Here's what analysts are saying about Amazon's earnings:
"A mixed quarter, with deceleration in AWS & margin pressure but accelerating unit & revenue growth. We got much needed visibility on the big investment in 2019 and we prefer the (old school) market share growth in units to higher retail margins in the near term. Valuation for Amazon is all about the long-term TAM, and we reiterate our Buy rating and increase our PO to $2,350 based on higher top-line estimates and unchanged multiples for our SOP analysis...While higher costs are understandable, AWS revenue & op. income were below estimates & the one real blemish in the Q, in our view. AWS remains lumpy, and Amazon continues to add more cloud dollars than peers."
"While AMZN's investment thesis was migrating to one of growing profitability from strong top-line growth, we think this print highlights that AMZN's revenue growth acceleration story is far from dead. In sum, though the 3Q19 OI guidance was somewhat disappointing, we would be buyers of any weakness as long as top line trends remain intact."
"While the deceleration at AWS will raise some concerns, we continue to believe we are still relatively early-stage in the shift of workloads to the cloud, the transition of traditional retail online, and the development of the advertising business. With revenue growth accelerating, we continue to believe AMZN represents one of the best risk/rewards in Internet and remain Buy-rated (CL) with a 12-month price target of $2,400."
"Overall, the AMZN narrative has shifted back more toward top-line growth in 2019 as we expected, but the magnitude of acceleration & accompanying investment spend are both bigger than we projected. Still, we believe investors will prefer the trade-off of profits for growth & we like how AMZN continues to raise the bar in online retail... AMZN remains one of our top picks and is on our US Equity Analyst Focus List."
"As we noted before, we like this offensive stance as it puts greater distance between Amazon's consumer value proposition and that of its competitors. Hence despite short term dip in operating income we submit that this augers potentially faster GMV growth in the out years and a steeper FCF ramp as a result. Our price target decreases modestly to $2225 vs prior $2250."
"AMZN posted mixed Q2 results—Revenue was above Street, while Operating Income came in below RBC/Street. Fundies were mixed —Revenue growth accelerated (21% Y/Y organic) and Gross Margins expanded (64 bps Y/Y), but Operating Margin contracted (78 bps Y/Y). Reiterating Outperform and lowering PT to $2,250 from $2,300."
"AMZN reported strong revenue growth, but unlike prior quarters, operating income came in below consensus. Similarly, revenue guidance was a beat due to strong growth from 1-day Prime shipping but operating income came in well below consensus on increased investments in Prime and AWS. Despite the near-term cost headwinds, we remain confident about Amazon's ability to gain market share and operating efficiency over time."
"Consistent with our preview, Amazon's 2Q19 results were mixed, with solid Retail revenue offset by slightly slower AWS growth and Operating Income that came in below forecasts and at the mid-point of the guidance range. Core N.A. Retail rev growth accelerated to +23% y/y vs. 19% in 1Q as did Int'l Retail. As we expected following the Microsoft Azure result, AWS rev growth decelerated to +37% vs. 41% in 1Q. The high-end of mgmt's 3Q OI guide is in-line w/ buy-side expectations and reflects investments in 1-Day delivery and S&M. All told, we again find these results as good but not great."
"As we digest AMZN's Q2'19 EPS report, there was some noise (especially against heightened investor expectations) in terms of Q2/Q3 profitability (investments behind multiple long-term growth drivers in logistics/fulfillment, cloud & marketing) but the main narrative was that the flywheel drivers of Amazon's ecosystem demonstrated pronounced strength (especially its core eCommerce business). Looking back across Amazon's history, we remain convinced short-term investments remain a driver of long-term growth against wide addressable markets. We continue to reiterate our stance that AMZN is a core holding within our coverage universe to gain exposure to secular growth trends in eCommerce, cloud computing, media consumption, digital advertising & AI voice assistants."
"AMZN reported revenue 1% above and operating income 17% below consensus and guided similarly above on revenue and below on OI. Retail revenue and unit growth accelerated on the 1-day delivery push, but were partially overshadowed by the AWS revenue and OI miss. We are not overly concerned with 2Q but given the positioning heading into the print, we wouldn't be surprised to see additional weakness. The long term story is improving on retail revenue acceleration, and AWS continues to add more dollar share than Azure/GCP combined, despite missing consensus."
"AMZN's ~1% better than expected total 2Q revenue and 3% better than expected 3Q revenue guidance (at the top-end) highlight how the budding 24-hour shipping offering is leading to incremental demand…immediately. We see this as a multi-quarter (potentially year) tailwind to growth as the company is still rolling it out in the US (even as N. America retail revenue came in 2% better than expected) and looking into '20 and beyond we expect a larger push in international markets to driver faster growth there."
"We support the company's investments in faster shipping, AWS, advertising services and international, which we expect to persist over the next several quarters. We believe one-day shipping will allow Amazon to widen the convenience gap versus peers. We are increasing our FY:19 revenue forecast as we expect continued strength in Online Stores, and lowering our FY:19 operating margin forecast to reflect the company's incremental investments in strategic areas."
"We think the retail and overall revenue acceleration in 2Q results outweighs any of the negatives around margin disappointment and soft AWS results, which were in line with our below-consensus estimates and our preview that Street AWS numbers looked aggressive and our recent note focusing on AWS Cloud Partner changes...We like Amazon's move to one-day, despite the near-term investing refining the logistics architecture and absorbing higher shipping costs, which over time we think can grow into significant efficiencies reducing per-unit shipping costs closer towards 2-day levels while increasing sales frequency, loyalty and deepening competitive moats."