Amazon stock has fallen by 28% from its recent peak. The main reason? New tariffs announced by President Trump on April 2, targeting imports from many global trade partners. Since Amazon sources many products internationally, this could mean higher costs for the company. Whether Amazon decides to absorb those costs or pass them on to customers, its profit margins might feel the pressure.

But Amazon is more than just an online store. It’s a tech giant with multiple business arms and the most powerful one right now is Amazon Web Services. This cloud platform offers digital services that don’t get hit by tariffs, making it a major profit driver for the company.

Why AWS Matters Right Now

AWS is the largest cloud platform in the world. It helps businesses with everything from data storage to building software. But now, it’s going even bigger into artificial intelligence (AI).

AWS is developing its own tech across all major parts of AI:

  • It built its own chips called “Trainium”, which can reduce AI training costs by up to 40%.
  • Its new large language models (LLMs), called Nova, are cheaper than competitors up to 75% cost savings.
  • It also launched “Q”, a smart virtual assistant that can help businesses write code and analyze internal data for new revenue ideas.

Nvidia might be building the engines of AI, but Amazon is creating the roads and highways to actually drive it at scale and that’s where the real battle begins

In 2024, AWS brought in $107.5 billion in revenue, just 16.8% of Amazon’s total $637.9 billion revenue, but it delivered over half of the company’s operating income: $68.6 billion. Its revenue has been growing at 19% per quarter, and on May 1, investors are eager to see if AWS kept that pace.

What About Amazon’s E-commerce Side?

Amazon’s e-commerce business is still its biggest source of revenue, but its profits are thin. To improve efficiency, Amazon redesigned its logistics in 2023 by dividing the U.S. into 8 regional networks. This helped lower shipping costs and speed up delivery.

But new tariffs threaten to undo that progress. Imports to the U.S. will cost at least 10% more and some items from China could become 245% more expensive. That’s a big deal. All eyes will be on CEO Andy Jassy and how he plans to handle these rising costs. His answers could decide how Amazon stock performs in the short term.

What Do Analysts Expect?

Wall Street predicts Amazon will report $1.36 in earnings per share (EPS) for Q1, which would be a 38.7% jump from last year. That strong growth will likely come from AWS, streaming and digital ads, all areas not affected by tariffs.

Is Amazon Stock a Smart Buy After the Drop?

With the stock down 28%, Amazon now trades at a P/E ratio of 31.1 much lower than its five-year average of 83. That’s a big discount. For comparison, the Nasdaq-100 index trades at 27.1. Looking ahead, analysts expect Amazon to earn $7.52 EPS in 2026, which puts its forward P/E at just 22.9. That means the stock would need to rise about 35.8% just to match today’s valuation level.

So, while Q1 results on May 1 might move the stock short-term, the real reason to invest in Amazon today is its long-term potential and strong valuation. Amazon has delivered a 191,000% return since it went public in 1997. One quarter won’t define its future. Whether you buy now or wait until after the earnings report, long-term investors could still come out ahead.