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Amazon Prime Week is approaching, and every year, retailers ride its coattails by launching their own sales events.

During the last earnings season, more than half of all retailers tracked mentioned tariffs during their earnings calls. Most agreed that consumers are becoming increasingly cautious and are trading down. As a result, this Prime Week it’s highly likely that retailers are banking on aggressive promotions to encourage spending, especially as shoppers continue to prioritize value. With consumers more price-sensitive than ever, online price comparisons will be a key part of their shopping behavior. Other retailers are aiming to capitalize on this trend by offering steep discounts to stay competitive.

Online discounts

Amazon (AMZN) will offer these deals primarily online and exclusively to Prime subscribers, while retailers such as Target (TGT), Best Buy (BBY), Walmart (WMT) and others will make similar promotions available both in-store and online. Nevertheless, price comparisons will largely take place online. Target and Walmart have already announced their sales to coincide with Prime Day. In fact, U.S. mall-based retailers traditionally become notably more promotional online—Target, for example, ramped up its discounting during Prime Week this year in an effort to attract more shoppers. Consumers may be especially drawn to Prime Week, given that Average Discount Penetration, the share of merchandise on sale, has been trending downward in recent months. The latest reading of 24% falls below the year-to-date average of 26%, and last year’s 34% average, among U.S. retailers (see Exhibit 1).

Exhibit 1: Average Discount Penetration for U.S. Retailers: 2019 – 2025

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Source: Centric Market Intelligence

Similarly, the latest average percent discount of 34% has remained slightly below last year’s level of 36%, and just under the 2025 year-to-date average of 35%. However, this average may still shift during Prime Week (see Exhibit 2).

Exhibit 2: Average Promotional Discount for U.S. Retailers: 2019 – 2025

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Source: Centric Market Intelligence.

Although Amazon pioneered Prime Day, other retailers have launched competing events. Target, for instance, introduced Circle Week to rival Prime Day promotions. This event is exclusive to members of Target’s free loyalty program, in contrast to Amazon and Walmart, where shoppers must pay to participate in Prime or Walmart+ memberships. While Walmart+ members receive discounting perks, non-members can still shop for deals.

E-commerce growth comparison

This year, Amazon’s Prime Day will take place on October 7–8, aligning with the same week as last year. The event will contribute to Amazon’s Q3 2025 revenue, which is projected to grow 7.9% year-over-year to $81.487 million, and is on track to outperform the October Prime Day results from the previous two years (see Exhibit 3). In recent years, Amazon has increasingly included third-party sellers in its Prime Day offerings. Its Fulfillment Centers continue to operate efficiently post-pandemic, with lean inventory levels well-timed for the event.

Exhibit 3: Amazon Prime Day Revenue in USD Millions: 2020 Actual – 2025 Estimate

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Source: LSEG I/B/E/S

In terms of year-over-year growth, Walmart is expected to see the biggest gain online for the fiscal quarter that includes Prime Week 2025. The discounter is expected to post a 26.0% e-commerce growth (Exhibit 4).

Exhibit 4: Online Growth Estimate: Quarter including Prime Week

Source: LSEG I/B/E/S

Analysts polled by LSEG are already bullish on Amazon’s performance for both Prime Days in 2025 (July and Oct). The consensus for Amazon’s Q3 2025 EPS, including July Prime sales, is $1.57. However, there’s a five-star rated analyst with a very accurate rating that published a Bold Estimate, which is different (in this case higher) than the consensus estimate.

Moreover, the StarMine Predicted Surprise is higher than 2%. The StarMine SmartEstimate is a weighted average of analyst estimates, with more weight given to more recent estimates and more accurate analysts. Our studies have shown that when the SmartEstimate differs from the consensus (I/B/E/S mean) by more than 2%, the company is likely to post subsequent earnings surprises directionally correct 70% of the time. This percentage difference is referred to as the Predicted Surprise (PS%) (Exhibit 5). This suggests that it’s likely that Amazon will beat earnings and post a positive surprise. The same can be said for Q4 2025, which includes this October Prime event.

Exhibit 5: Amazon Predicted Surprise %

Source: LSEG Workspace.

Amazon also scores in the top quartile with the StarMine Analysts Revisions Model (ARM) with a score of 84 out of a possible score of 100, placing it in the top quartile. This StarMine model suggests that analysts polled by LSEG are likely to revise earnings estimates upward for Amazon. StarMine uses I/B/E/S estimates, fundamentals and other LSEG content to provide robust alpha-generating predictive analytics and quant models.

Exhibit 6: Amazon StarMine Model Scores

Source: LSEG Workspace.

Buy-side analysts are increasingly optimistic about Amazon, as evidenced by the StarMine Smart Holdings Model, which highlights key investor concerns. Notably, Amazon’s high return on equity (ROE) and return on assets (ROA) make it a compelling investment choice. The online giant is profitable and therefore is attractive to the buy side. The StarMine Smart Holdings Model reflects positive sentiment from buy-side analysts, and Amazon scores 98 out of 100 on the Short Interest Model, suggesting investors are not betting against the company (Exhibit 6).

The battle for subscriptions

During the pandemic, shoppers flocked online as brick-and-mortar stores remained closed. Giant retailers including Amazon and Walmart saw a spike in membership as shoppers justified the annual fee. Since then, consumers’ shopping behavior has changed dramatically.

Still, in terms of revenue, Amazon still brings in the highest amount in U.S. dollars (Exhibit 7). Many shoppers couldn’t justify Amazon’s annual fee until the pandemic, when they started to buy everything online, and started having Whole Foods deliver for the first time. They also started streaming Prime TV movies and binge-watching series. As a result, back then, Amazon saw a whopping 28.7% gain in subscription services revenue in the midst of the pandemic (Q2 2020).

The pandemic pulled forward a lot of demand that, once satisfied, started showing up in slower Prime membership revenue growth. In the last fiscal quarter, Amazon grew its subscription services revenue by 12.4% from the previous year to $12.208 billion. This, however, is projected to see a slowdown in growth to 10.8% in Q4 2025 (Exhibit 7).

Meanwhile, analysts polled by LSEG project Walmart will grow its membership income by 7.3% at the end of this year. That is lower than both Amazon and Costo’s projected membership income growth of 10.5% and 12.4% year-over-year gain (Exhibit 7).

In order to attract new customers, Walmart is currently offering 50% off its annual membership – coinciding with Prime Week, making it the least expensive out of the three club memberships fees. Costco’s membership offering ranges from $65 to $130, below Amazon’s $139 membership fee.

Exhibit 7: Amazon, Walmart and Costco Membership Revenue in USD Millions: 2023 – 2025

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Source: LSEG I/B/E/S

COGS / Gross profit

This year’s tariffs caused several retailers to deal with higher cost of goods sold (COGS). As a result, COGS have risen from last year’s levels (Exhibit 8).

Moreover, retailers were less promotional this year since pre-pandemic levels. This in turn, helped retailers beat earnings expectations and post healthier margins so far this year. Currently, Amazon has the highest gross profit margin compared to Costco and Walmart (Exhibit 8).

However, It’s important to note that Amazon businesses include e-commerce, digital advertising and AWS, among other divisions. As a result, Amazon’s gross profit is not a reflection of just its online retail business. And it likely wouldn’t even be that high if not for the $10.2 billion of profit generated from its cloud business.

Exhibit 8: COGS and Gross Profit for Q4 2024 – Q4 2025 Estimates

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Source: LSEG I/B/E/S

To gain a better understanding of Amazon’s profitability, we turn to the StarMine Earnings Quality (EQ) Model. According to the StarMine EQ Model, Amazon scores a 28 out of a possible 100. Placing it in the bottom third decile suggests that earnings might not be derived from sustainable sources. The company’s operating efficiency component suggests that Amazon could use some help in this area.

Still, Amazon’s operating profit margins has been improving over the past two years. Its profit margin of 27.4% is above the multiline retail industry of 19.9%. It likely wouldn’t even be that high if not for the last quarter Q2 2025 cloud’s unit’s operating profits ($10.2 billion) representing more than 50% of company’s profitability. Our research shows that companies with low returns tend to have a lower probability of sustaining earnings in the future.

Exhibit 9: Amazon Operating Profit Margin

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Source: Workspace

As an equity investment, Amazon’s stock price looks a little expensive. After adjusting long term growth (LTG) estimates for optimism bias, the StarMine Intrinsic Value (IV), which adjusts for the optimism bias often found in analyst estimates for faster growing companies and estimates well into the future, projects a 5-year CAGR of 12.5%. That’s slightly below the industry median of 15.1% but above Amazon’s peer median of 4.8%.

Although projected to grow faster than its peers, the market expects Amazon to grow faster still. At $222.41 (the last closing price as of this writing), Amazon’s Market Implied Growth is 21.2%. This number is intended to represent current market expectations – how much growth is currently priced in. Amazon is a high-expectations stock. [Note, the industry growth is 15.1%, not 40.7%]. While the stock took a plunge for being a pandemic darling, it’s only up 1.5% YTD.

Research has shown that sell-side analyst estimates include significant systematic errors and biases. Our StarMine Intrinsic Valuation (IV) model has identified and systematically removed three forms of analyst error and bias to improve the accuracy of longer-term estimates and enhance their ranking and sorting abilities.

Current quarter retail earnings forecast

Looking forward to the third quarter of 2025, our LSEG retail earnings data show that consumers are spending most of their money on household products and staples. Moreover, not all shoppers might be eyeing discretionary items this quarter. And instead of buying apparel and general merchandise, consumers continue to prioritize their spending on travel and eating out again this year (Exhibit 10).

The LSEG U.S. Retail and Restaurant Q3 earnings index, which tracks changes in the growth rate of earnings within the sector, is expected to show a 1.8% growth over last year’s levels. Our metrics show that six of ten consumer-related industries have turned negative (Exhibit 10). Of these industries, tracked by LSEG, the Hotels, Restaurant & Leisure sector is headed for the one of the highest earnings growth rate in the first quarter, recording a 9.7% gain over last year’s robust growth.

This suggests that it continues to be one of the strongest performing sector since last year as consumers’ preferences have changed towards services. Making up for lost time during the pandemic, people are traveling again, staying at hotels and eating out.

Exhibit 10: Retail Earnings Growth Rates: Q3 2025

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Source: LSEG I/B/E/S

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