Billionaire investors Bill Ackman and Chase Coleman significantly increased their holdings in Amazon (AMZN) during Q2 2025, driven by the company's robust operating profit growth from Amazon Web Services (AWS) and advertising services. This reflects strong institutional confidence in Amazon's high-margin segments, even as the company continues to make substantial investments in AI infrastructure, which is impacting near-term profitability forecasts.

Prominent Investors Increase Stakes in Amazon Amid Strong Profitability from Cloud and Advertising Segments

U.S. markets observed significant investor activity in Amazon.com Inc. (AMZN) during the second quarter, as notable billionaire investors Bill Ackman and Chase Coleman substantially increased their holdings. This surge in institutional confidence appears to be underpinned by Amazon's robust operating profit growth, driven primarily by its high-margin Amazon Web Services (AWS) and burgeoning advertising businesses.

The Event in Detail

Filings for the second quarter revealed that Bill Ackman's Pershing Square initiated a new position in Amazon, acquiring $1.28 billion worth of shares, making AMZN a substantial 9.3% of his hedge fund's portfolio. Concurrently, Chase Coleman's Tiger Global Management significantly expanded its existing Amazon stake, increasing its holdings by 62.2% from the first quarter.

These substantial commitments coincided with Amazon's strong financial performance in the second quarter of 2025. The company reported net sales of $167.7 billion, a 13% increase year-over-year, surpassing analyst estimates of $162.05 billion. Operating income saw an even more pronounced rise of 31% year-over-year, reaching $19.2 billion. Earnings per share (EPS) registered $1.68, outperforming the forecasted $1.32 by 27.27%.

A closer examination of Amazon's profitability highlights the crucial role of its high-margin segments. Amazon Web Services (AWS) generated sales of $30.9 billion, marking a 17.5% year-over-year increase. More critically, AWS contributed $10.2 billion to operating income, accounting for approximately 53% of Amazon's total operating income in Q2 2025, despite representing only about 18.42% of total net sales. The company's advertising business also demonstrated robust growth, with revenue increasing by 22%.

Analysis of Market Reaction

The significant capital allocation by these prominent investors reflects a bullish sentiment towards Amazon's long-term profit growth trajectory. The market's positive reaction was initially evident, with Amazon's stock rising 1.7% in after-hours trading to $235.67 following the earnings announcement. This investor optimism is largely attributed to Amazon's successful pivot towards higher-margin services, particularly AWS and advertising, which are bolstering overall profitability. The 31% increase in operating income, outpacing the 13% revenue growth, underscores this strategic shift. However, premarket trading on August 1 saw a 7.54% decline, suggesting some investor scrutiny regarding the company's outlook, possibly related to future profitability forecasts in light of continued high capital expenditures.

Broader Context & Implications

Amazon's financial health is increasingly tied to the performance and strategic investments within AWS. The division's substantial contribution to operating income allows Amazon to continue investing aggressively across its diverse portfolio, including significant capital expenditures in artificial intelligence (AI) infrastructure. CEO Andy Jassy emphasized the rapid expansion of generative AI within AWS, noting:

"AWS is building a large, fast-growing, triple-digit year-over-year percentage multibillion-dollar business with more demand than we have supplied for at the moment."

This strategic focus is expected to drive future growth, capitalizing on the vast untapped market for cloud migration.

However, the competitive landscape in cloud computing remains intense. While AWS recorded 17.5% growth, rivals such as Microsoft Azure reported 39% growth and Google Cloud saw a 32% increase, highlighting the dynamic nature of the market. Furthermore, these substantial investments in AI and data centers are influencing Amazon's financial metrics, with AWS profit margins experiencing a compression from 39.5% in Q1 to 32.9% in Q2. The company's free cash flow also decreased to $18.2 billion for the trailing twelve months, a notable drop from $53.0 billion in the prior year, reflecting the capital-intensive nature of sustaining growth in this evolving technological landscape. Despite these factors, the broader institutional investor community has shown a net increase in holdings, with major firms like Vanguard Group and BlackRock also boosting their positions.

Expert Commentary

Analysts widely echo the bullish sentiment, with a consensus 'Strong Buy' rating for AMZN. Price targets range from $261.76 to $350, reflecting optimism about the company's future growth prospects. The significant investments by respected billionaires further underscore strong confidence in Amazon's long-term profit growth story, particularly within its high-margin segments. This confidence is rooted in the company's ability to drive outsized profit growth relative to revenue growth through the continued expansion of AWS and advertising services.

Looking Ahead

Looking ahead, Amazon's guidance for the third quarter of 2025 anticipates net sales between $174.0 billion and $179.5 billion, representing projected growth of 10% to 13%. While this sales guidance is slightly above consensus analyst estimates, the company's operating income guidance of $15.5 billion to $20.5 billion falls below the average analyst estimate of $19.4 billion. This disparity suggests that continued substantial investments in AI infrastructure and cloud expansion are expected to pressure near-term profitability. Investors will be closely monitoring the company's ability to balance aggressive strategic investments with sustained margin expansion, particularly in its AWS division, as the competitive dynamics in the cloud and AI sectors continue to evolve.