11:02 AM EDT, 08/01/2025 (MT Newswires) -- Amazon's ( AMZN ) Retail growth and profitability continue to "impress and improve" and drive earnings, Morgan Stanley said in a Friday note.

The company's ability to navigate tariff complications were on display in Q2 as Retail revenue came in 2% better than expected, fulfillment and shipping cost per unit continue to improve, and first-party merchandise margins were around 100 basis points higher than expectations, Morgan Stanley analysts said.

The performance of Retail supports a bullish view on Amazon's ( AMZN ) long-term earnings power, and the analysts said they expect the company's "ability to match and ship more items to more people faster and in a more profitable manner will continue to improve."

On the AWS front, the analysts said they expect an increasing quarterly contribution from Anthropic, as well as contributions from non-Anthropic generative AI and non-generative AI to lead to faster growth in H2 of 2026. AI trends will boost many companies simultaneously and lead to numerous growth opportunities, and Amazon ( AMZN ) is poised to benefit "meaningfully," they said.

Morgan Stanley maintained the company's stock rating at overweight and price target at $300.

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