Amazon's Cloud Computing Growth Disappoints as AI Race Heats Up

Amazon slumps after cloud computing growth underwhelms investors

Aug 1 (Reuters) - Amazon.com shares tumbled 8% on Friday, as the tech giant's results fanned investor fears its cloud unit was falling behind Microsoft and Alphabet in the artificial intelligence race. Amazon Web Services, long the cloud-computing market leader, edged past Wall Street estimates for June-quarter revenue on Thursday with a 17.5% increase, but it widely lagged the 39% growth seen at Microsoft Azure and Google Cloud's 32% gain. That disappointing growth came even as Amazon shelled out $31.4 billion in capital expenditure, more than rivals, and suggested it would spend a more-than-estimated $118 billion for the year. Google and Microsoft also pledged higher spending, but were rewarded from investors on signs AI was already becoming a major growth driver across their businesses, justifying the bill. The companies have been spending billions of dollars on data centers and cutting-edge chips that they say are necessary to overcome supply constraints hampering their efforts to capitalize on soaring demand for AI services. "The spotlight was firmly on AWS and it didn't quite shine as brightly as expected," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn't the knockout many wanted to see." Growing expenses have also started to take a bite out of AWS's margins, the business that has long been Amazon's profit engine, accounting for about 60% of its operating income. AWS margins contracted to 32.9% during the quarter, their lowest level since the final quarter of 2023, and Amazon also issued a current-quarter total operating income forecast that was lower than market estimates. CEO Andy Jassy told analysts on a post-earnings call that it was still "very early days" in the AI race and that Amazon's massive cloud business, much larger than rivals, was primed to perform well once the AI capacity constraints start to ease. The stock, up 6.7% so far this year, was trading at $215.9 before the bell. The drop was set to erase around $190 billion from Amazon's market value, if premarket losses hold. The company still trades at a relatively high premium, with a 12-month forward price-to-earnings ratio of 33.87, compared with Microsoft's (MSFT.O), opens new tab 34.19 and Alphabet's (GOOGL.O), opens new tab 18.64, according to data compiled by LSEG. RETAIL RESILIENCE At least 30 analysts raised their price targets on the stock, while three lowered, giving it a median view of $260. Some of that analyst confidence comes from the strong performance of Amazon's retail business, which has remained resilient in the face of Trump administration tariffs that have hobbled many retailers and their supply chains. Amazon has yet to see a drop in demand or a notable rise in prices in the first half of the year, Jassy said, as its online store sales jumped a better-than-expected 11% in the second quarter. Manufacturers and suppliers have shouldered most of the tariff impact so far, analysts said, but noted that much of the inventory Amazon sold in the quarter arrived in the preceding three-month period. "If Amazon's retail business was a standalone entity, it would be trading dramatically higher following the near-perfect results," said Michael Morton, analyst at MoffettNathanson. "Unfortunately, as we all know, the success of the retail business is not what's going to matter in the near term for Amazon's stock price." Reporting by Kanchana Chakravarty in Bengaluru and Amanda Cooper in London; Editing by Alun John and Shilpi Majumdar Our Standards: The Thomson Reuters Trust Principles., opens new tab

Amazon projects quarterly revenue above market estimates

July 31 (Reuters) - Amazon.com (AMZN.O), opens new tab forecast current-quarter revenue above market estimates on Thursday, encouraged by solid retail business despite pressures from U.S. tariffs on imports, while its cloud computing unit also benefits from strong AI demand. The company expects net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. Shares of the company, however, fell about 1% in choppy extended trading. Amazon Web Services, the company's cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. Blockbuster cloud revenue growth at Microsoft (MSFT.O), opens new tab and Alphabet's (GOOGL.O), opens new tab Google raised expectations for Amazon's cloud unit, Amazon Web Services, the world's largest cloud provider. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. Though a small part of Amazon's total revenue, AWS is a key driver of Amazon's profits, typically accounting for about 60% of the company's overall operating income. AWS reported 16.9% growth in the first quarter. While Amazon has poured billions into AI infrastructure, analysts have said that the lack of a strong AI model from AWS is causing some concerns that the company could be trailing behind rivals in AI development, analysts said. Meanwhile, President Trump's tariffs have dampened the U.S. retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact. In the past, Trump has said the levies will bring manufacturing power and jobs back to the U.S. Investors have been closely watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June. Analysts had said Amazon's focus on low prices, quick delivery and the sheer number of product categories have helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. Reporting by Deborah Sophia in Bengaluru; Editing by David Gregorio Our Standards: The Thomson Reuters Trust Principles., opens new tab

Amazon cloud computing results fail to impress, shares dive

July 31 (Reuters) - Amazon.com (AMZN.O), opens new tab on Thursday forecast third-quarter sales above market estimates, but failed to live up to lofty expectations for its Amazon Web Services cloud computing unit after rivals handily beat Wall Street forecasts. Shares plunged by more than 7% after-hours. Before releasing the results, Amazon had finished regular trading up 1.7% to $234.11. Both Google-parent Alphabet (GOOGL.O), opens new tab and Microsoft (MSFT.O), opens new tab posted big cloud computing revenue gains this month. AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, down from 39.5% in this year's first quarter and 35.5% a year ago. The second-quarter margin results were at their lowest level since the final quarter of 2023. "AWS is their growth engine and to see that drop in margin is dropping the stock," said Ken Mahoney, CEO of Mahoney Asset Management. "The market was looking for further fireworks to take this up back to new highs and beyond." AWS reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. By comparison, sales for Microsoft's Azure rose 39% and Google Cloud gained 32%. Amazon expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. The range for operating income in the current quarter was also light. Amazon forecast between $15.5 billion and $20.5 billion, compared with expectations of $19.45 billion. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. AWS represents a small part of Amazon's total revenue, but it is a key driver of profits, typically accounting for about 60% of Amazon's overall operating income. While Amazon has poured billions of dollars into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing concerns that the company could be trailing rivals in AI development. The AWS results are "alarming," said Dave Wagner, portfolio manager for Aptus Capital Advisers, which holds Amazon shares. "Amazon is an operating leverage story and they had to be able to grow, at least relative to costs. And they haven't done it. The largest tech companies have been boosting capital expenditures to add more data center capacity, particularly for artificial intelligence software deployment and development. Amazon said it expected second-half spending roughly the same as its second quarter total of $31.4 billion, suggesting it would spend around $118 billion for the full year. Analysts had projected about $100 billion. On Wednesday, Microsoft said it would spend a record $30 billion in the current quarter. Google-parent Alphabet raised its spending forecast by $10 billion to $85 billion for the year. Seattle-based Amazon posted online store sales of $61.5 billion, an 11% gain. Advertising sales, a fast-growing segment for Amazon, were up 23% to $15.7 billion. Investors have been watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June. CEO Andy Jassy, in a call with analysts, addressed concerns about the impacts of tariffs on Amazon's core retail business. "Through the first half of the year, we haven't yet seen diminishing demand nor prices meaningfully appreciating," he said on a call with analysts. "We also have such diversity of sellers in our marketplace, over 2 million sellers in total, with differing strategies of whether to pass on higher costs to consumers." He added: "We just don't know what's going to happen moving forward. It's hard to know where the tariffs are going to settle, particularly in China." President Donald Trump's tariffs have major retailers and consumer goods companies scrambling to protect margins while trying not to hurt consumer demand. Trump has said the levies will bring manufacturing power and jobs back to the U.S. Analysts had said Amazon's focus on low prices, quick delivery and its many product categories helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. Amazon has been trimming jobs, including at its AWS, books, devices and podcasting units. Headcount fell by 14,000 workers from this year's first quarter, bringing the total to 1.46 million, the first decline since the beginning of 2024. Reporting by Deborah Sophia in Bengaluru; Editing by David Gregorio Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence Greg Bensinger Thomson Reuters Greg Bensinger joined Reuters as a technology correspondent in 2022 focusing on the world's largest technology companies. He was previously a member of The New York Times editorial board and a technology beat reporter for The Washington Post and The Wall Street Journal. He also worked for Bloomberg News writing about the auto and telecommunications industries. He studied English literature at The University of Virginia and graduate journalism at Columbia University. Greg lives in San Francisco with his wife and two children.

Amazon cloud computing results fail to impress, shares slide after hours

July 31 (Reuters) - Amazon.com (AMZN.O), opens new tab on Thursday forecast third-quarter sales above market estimates, but failed to live up to lofty expectations for its Amazon Web Services cloud computing unit after rivals handily beat expectations. Shares fell by more than 3% in after-hours trading after finishing regular trading up 1.7% to $234.11. Both Google-parent Alphabet (GOOGL.O), opens new tab and Microsoft (MSFT.O), opens new tab posted big cloud computing revenue gains this month. AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, down from 39.5% in this year's first quarter and 35.5% a year ago. The second-quarter margin results were at their lowest level since the final quarter of 2023. AWS, the cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. By comparison, sales for Microsoft's Azure rose 39% and Google Cloud gained 32%. After competitors' strong showing, "AWS is lingering at 17% growth," said Gil Luria, a D.A. Davidson analyst. "That is very disappointing, even to the point where if Microsoft's Azure continues to grow at these rates, it may overtake AWS as the largest cloud provider by the end of next year." Amazon expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. The range for operating income in the current quarter was also light. Amazon forecast between $15.5 billion and $20.5 billion, compared with expectations of $19.45 billion. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. AWS represents a small part of Amazon's total revenue, but it is a key driver of profits, typically accounting for about 60% of Amazon's overall operating income. While Amazon has poured billions of dollars into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing concerns that the company could be trailing rivals in AI development. The AWS results are "alarming," said Dave Wagner, portfolio manager for Aptus Capital Advisers, which holds Amazon shares. "Amazon is an operating leverage story and they had to be able to grow, at least relative to costs. And they haven't done it." The Seattle-based retailer posted online store sales of $61.5 billion, an 11% gain. Advertising sales, a fast-growing segment for Amazon, were up 23% to $15.7 billion. Investors have been watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June. President Donald Trump's tariffs have dampened the U.S. retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact. Trump has said the levies will bring manufacturing power and jobs back to the U.S. Analysts had said Amazon's focus on low prices, quick delivery and the sheer number of product categories helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. The company has been trimming jobs in its corporate offices, including at its AWS, books, devices and podcasting units. Its efforts were showing results: headcount fell by 14,000 workers from this year's first quarter, bringing the total to 1.46 million. Reporting by Deborah Sophia in Bengaluru; Editing by David Gregorio Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence Greg Bensinger Thomson Reuters Greg Bensinger joined Reuters as a technology correspondent in 2022 focusing on the world's largest technology companies. He was previously a member of The New York Times editorial board and a technology beat reporter for The Washington Post and The Wall Street Journal. He also worked for Bloomberg News writing about the auto and telecommunications industries. He studied English literature at The University of Virginia and graduate journalism at Columbia University. Greg lives in San Francisco with his wife and two children.

Amazon cloud computing results fail to impress, shares drop after hours

July 31 (Reuters) - Amazon.com (AMZN.O), opens new tab forecast third-quarter sales above market estimates on Thursday but failed to live up to lofty expectations for its Amazon Web Services cloud computing unit after rivals handily beat expectations. Shares fell by more than 2% in after-market trading after finishing regular trading up 1.7% to $234.11. Both Google-parent Alphabet (GOOGL.O), opens new tab and Microsoft (MSFT.O), opens new tab posted big cloud computing revenue gains earlier this month. AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, compared with 39.5% in this year's first quarter and 35.5% a year ago. The second-quarter margin results were at their lowest level since the final quarter of 2023. AWS, the cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. After strong growth from Microsoft and Google, "AWS is lingering at 17% growth," said Gil Luria, a D.A. Davidson analyst. "That is very disappointing, even to the point where if Microsoft's Azure continues to grow at these rates, it may overtake AWS as the largest cloud provider by the end of next year." The company expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. Blockbuster cloud revenue growth at Microsoft (MSFT.O), opens new tab and Alphabet's (GOOGL.O), opens new tab Google raised expectations for AWS, the world's largest cloud provider. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. AWS represents a small part of Amazon's total revenue, but it is a key driver of profits, typically accounting for about 60% of Amazon's overall operating income. While Amazon has poured billions into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing some concerns that the company could be trailing rivals in AI development, analysts said. President Donald Trump's tariffs have dampened the U.S. retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact. Trump has said the levies will bring manufacturing power and jobs back to the U.S. Investors have been closely watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June. Analysts had said Amazon's focus on low prices, quick delivery and the sheer number of product categories has helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. Reporting by Deborah Sophia in Bengaluru; Editing by David Gregorio Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence Greg Bensinger Thomson Reuters Greg Bensinger joined Reuters as a technology correspondent in 2022 focusing on the world's largest technology companies. He was previously a member of The New York Times editorial board and a technology beat reporter for The Washington Post and The Wall Street Journal. He also worked for Bloomberg News writing about the auto and telecommunications industries. He studied English literature at The University of Virginia and graduate journalism at Columbia University. Greg lives in San Francisco with his wife and two children.

Amazon slides after cloud computing growth underwhelms investors

Aug 1 (Reuters) - Amazon.com (AMZN.O), opens new tab shares dropped nearly 8% before the bell on Friday, after growth in its cloud computing unit failed to impress investors, in contrast to the robust gains reported by AI-focused rivals Alphabet (GOOGL.O), opens new tab and Microsoft (MSFT.O), opens new tab. Amazon Web Services represents a small part of Amazon's total revenue, but it is a key driver of profit, typically accounting for about 60% of the company's overall operating income. "While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn't the knockout many wanted to see, highlighting just how tightly investor sentiment is tied to the AI narrative right now," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. While AWS reported a 17.5% increase in revenue during the second quarter, sales for Microsoft's Azure jumped 39% and Google Cloud gained 32%. Profit margin of the Amazon division also contracted. Big Tech has faced intense scrutiny from investors over the estimated $330 billion AI spend this year before the latest earnings, with Microsoft on track to potentially outspend its rivals over the next year. TARIFF UNCERTAINTY Amazon said its core retail business has largely remained shielded from U.S. President Donald Trump's tariffs, which have forced many retailers and consumer goods firms to seek ways to protect margins without dampening demand. "Through the first half of the year, we haven't yet seen diminishing demand nor prices meaningfully appreciating," CEO Andy Jassy said on a call with analysts, adding the company was unsure of the tariff trajectory moving forward, especially in China. "Thus far, we believe that manufacturers and suppliers are bearing the brunt of the tariff impact", but the bulk of inventory Amazon sold in Q2 was inbound in Q1, suggesting some room for tariff uncertainty ahead, J.P.Morgan strategists said in a note. Amazon's 12-month forward price-to-earnings ratio was at 33.87, compared with Microsoft's 34.19 and Alphabet's 18.64, according to data compiled by LSEG. Reporting by Kanchana Chakravarty in Bengaluru and Amanda Cooper in London; Editing by Alun John and Shilpi Majumdar Our Standards: The Thomson Reuters Trust Principles., opens new tab

Amazon tumbles after cloud computing growth disappoints investors

Aug 1 (Reuters) - Amazon.com shares fell about 7% on Friday as the tech giant's results fanned investor fears its cloud unit was falling behind Microsoft and Alphabet in the artificial intelligence race. Amazon Web Services, long the cloud-computing market leader, edged past Wall Street estimates for June-quarter revenue on Thursday with a 17.5% increase, but it widely lagged the 39% growth seen at Microsoft Azure and Google Cloud's 32% gain. That disappointing growth came even as Amazon shelled out $31.4 billion in capital expenditure, more than rivals, and suggested it would spend a more-than-estimated $118 billion for the year. Google and Microsoft also pledged higher spending, but were rewarded from investors on signs AI was already becoming a major growth driver across their businesses, justifying the bill. The companies have been spending billions of dollars on datacenters and cutting-edge chips that they say are necessary to overcome supply constraints hampering their efforts to capitalize on soaring demand for AI services. "The spotlight was firmly on AWS and it didn't quite shine as brightly as expected," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn't the knockout many wanted to see." Growing expenses have also started to take a bite out of AWS's margins, the business that has long been Amazon's profit engine, accounting for about 60% of its operating income. AWS margins contracted to 32.9% during the quarter, their lowest level since the final quarter of 2023, and Amazon also issued a current-quarter total operating income forecast that was lower than market estimates. CEO Andy Jassy told analysts on a post-earnings call that it was still "very early days" in the AI race and that Amazon's massive cloud business, much larger than rivals, was primed to perform well once the AI capacity constraints start to ease. The stock, up 6.7% so far this year, was at $216.6 in early trading. The drop was set to erase around $170 billion from Amazon's market value, if the losses hold. The company still trades at a relatively high premium, with a 12-month forward price-to-earnings ratio of 33.87, compared with Microsoft's (MSFT.O), opens new tab 34.19 and Alphabet's (GOOGL.O), opens new tab 18.64, according to data compiled by LSEG. RETAIL RESILIENCE At least 30 analysts raised their price targets on the stock, while three lowered, giving it a median view of $260. Some of that analyst confidence comes from the strong performance of Amazon's retail business, which has remained resilient in the face of Trump administration tariffs that have hobbled many retailers and their supply chains. Amazon has yet to see a drop in demand or a notable rise in prices in the first half of the year, Jassy said, as its online store sales jumped a better-than-expected 11% in the second quarter. Manufacturers and suppliers have shouldered most of the tariff impact so far, analysts said, but noted that much of the inventory Amazon sold in the quarter arrived in the preceding three-month period. "If Amazon's retail business was a standalone entity, it would be trading dramatically higher following the near-perfect results," said Michael Morton, analyst at MoffettNathanson. "Unfortunately, as we all know, the success of the retail business is not what's going to matter in the near term for Amazon's stock price." Reporting by Aditya Soni and Kanchana Chakravarty in Bengaluru and Amanda Cooper in London; Editing by Alun John and Shilpi Majumdar Our Standards: The Thomson Reuters Trust Principles., opens new tab

Amazon fails to quiet tariffs concerns as it offers worse-than-expected financial outlook

Tech giant reported generally positive revenue numbers, but may not meet expectations on its operating income Amazon failed to quiet concerns over how Donald Trump's sweeping tariffs would affect its e-commerce business as it reported its latest quarterly results Thursday. Wall Street's affinity for the tech giant faltered in response. The top line numbers from Amazon's second quarter earnings report exceeded Wall Street's projections. The tech company beat expectations with its revenue up 13.3% year over year to $167.7bn. Market experts had estimated the company would report around $162bn in revenue and 9% percent growth. The company's Amazon Web Services cloud computing division reported its sales reached $30.9bn in an increase of 17.5% year over year. However, the company may not meet expectations on its operating income, reporting that it would bring in between $15.5bn and $20.5bn compared with expectations of about $19.4bn. Despite the generally positive revenue numbers, Amazon's share price fell over 3% in after hours trading, a sign investors lacked confidence in the company's immediate future. Amazon's stock was up about 6% so far this year prior to Thursday's earnings call, following a rough first quarter that saw a decline due to uncertainty around how Trump's tariffs would hurt its reliance on international sellers. The administration also criticized Amazon in April following a report that the company planned to itemize tariff-related price increases on its platform. No such itemization appeared on Amazon's marketplace. Amazon's earnings come as the company is engaged in big tech's fevered spending race to dominate the artificial intelligence market. Companies including Google, Meta and Microsoft are pledging to spend tens of billions to advance the technology, while Amazon announced it would spend $100bn in 2025 with the "vast majority" of that going towards enhancing its AI capabilities. The company's CEO Andy Jassy touted Amazon's AI investments in an earnings press release, claiming that it had deeply integrated AI services into many of its products and operations. "Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I'm excited for what lies ahead," Jassy said. Amazon has invested billions of dollars into massive data centers to power its Amazon Web Services cloud business and expand its use of generative AI. In June, it announced a plan to spend $20bn building two facilities in Pennsylvania. Governor Josh Shapiro described it as the largest private sector investment in the state's history. Another Amazon facility in Indiana, the company's biggest yet, stretches over 1,200 acres of land and is set to host at least 30 data centers. The e-commerce giant has partnered with Anthropic, one of the biggest artificial intelligence startups to emerge from the recent boom, to increase its stature in the AI world and integrate the technology into its variety of services. Amazon has already invested $8bn in the AI company and may make another multibillion dollar investment soon, according to a Financial Times report from this month. Amazon also struck a deal earlier this year with the New York Times to use some of their content for AI training purposes or for generating summaries with its products like Alexa, with the Wall Street Journal reporting this week that the tech company would pay between $20m and $25m a year for the licensing rights.

Amazon's record-breaking cloud revenue fails to excite investors

Amazon's profits surged during the second quarter of the year, with its cloud business recording record revenue. Posting after the bell on Thursday, the company has beaten Wall Street's estimates for its earnings. Total revenues increased to $167.7 billion, surpassing analysts' expectations of $162.2 billion, according to Visible Alpha consensus, rising 12% year-over-year (accounting for the favorable impact of foreign exchange rates throughout the quarter). Earnings per share reached $1.68 compared to $1.26 per diluted share, in second quarter of 2024, and beating expectations of $1.33 according to analysts surveyed by LSEG. Amazon Web Service (AWS) sales reached $30.9 billion, a year-over-year jump of 17.5%, marginally beating consensus expectations of around $30.7 billion for the cloud computing unit. That's the highest on record, and AWS now accounts for 20% of total revenue. It remains the world's largest cloud provider, dominating about one-third of the global market. "Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I'm excited for what lies ahead," said CEO Andy Jassy in a release. The North America retail operating margin, which oversees Amazon's online marketplaces, grew at a more modest 7.5%. Nonetheless, the margin has increased significantly from a meager 1.1% at the beginning of last year, and outshone analysts' 6% prediction, suggesting consumer confidence has remained resilient amid concerns that tariffs on U.S. imports could hike e-commerce prices. Advertising segments grew by 23%, totally around $15.7 billion in revenue, beating estimates of $14.99 billion, according to StreetAccount. "The company's vast customer database provides rich material for improving advertising algorithms and targeting, which could drive higher margins through better conversion rates and increased advertiser spending," wrote IG analyst Fabien Yip. The results show that companies are continuing to use Amazon's cloud services to scale their artificial intelligence ambitions. AWS dominates when it comes to custom chips for AI, with Trainium and Inferentia used by start-ups like Anthropic, Runway, and Hugging Face using them for large model training. AWS is also leading the race when it comes to its AI stack offerings: Amazon Bedrock is considered to be the broadest in the industry, offering access to models from Anthropic, Meta, and Mistral. Amazon's stock fell 2% during after hours trading. While the firm beat analysts' forecasting, it has somewhat paled compared to Microsoft's stellar quarterly earnings. The tech giant posted revenue growth of 18% on Wednesday, after its cloud business Azure grew by almost 40%, year-over-year. Microsoft continues to reap the rewards of its early bet on OpenAI, having invested $1 billion into the start-up back in 2019. The deal gave Microsoft access to market leader ChatGPT without having to foot the hefty bill costs of training the LLM internally. As per the partnership, Microsoft has built AI tools, such as its Copilot assistant, based on ChatGPT models, and embedded them within its corporate and consumer products. The deal also made Microsoft its exclusive data centre provider, an agreement which has proved lucrative as OpenAI's compute needs have soared since its 2022 debut. By contrast, AWS has been criticized for being slow the generative AI boom. Its large-language models -- Rufus, a shopping assistant, and Amazon Q, a business and developer-focused assistant -- have weaker brand equity than rival bots such as OpenAI's ChatGPT, Anthropic's Claud, or Google's Gemini.

Why is Microsoft soaring while Amazon sinks? AI growing pains

Wall Street analysts who follow tech and cloud computing were all but popping Champagne on July 30. Microsoft had reported stellar financial results and strong growth that could be connected to artificial intelligence. After the market closed, extended-hours trading shot Microsoft's share price up by as much as 9%. The next day, Microsoft was briefly valued at $4 trillion. (Then, as all good celebrations do, the rally took a breather on Friday as Microsoft's share price fell by almost 2%, before gaining more than 4% by midday Monday.) For Microsoft CEO Satya Nadella and Chief Financial Officer Amy Hood, during a call with analysts, almost every question began with some sort of congratulations. "I've been covering Microsoft for a while and I don't think I've ever seen a quarter where everything came together this well," said Keith Weiss, an analyst with Morgan Stanley, who asked the first question on the call with Microsoft brass. "Congratulations on that execution." Then on Thursday, when Amazon CEO Andy Jassy and Chief Financial Officer Brian Olsavsky answered questions from analysts, the mood chilled. Amazon's cloud computing division, Amazon Web Services, reported revenue that beat estimates, but Wall Street was underwhelmed by the growth. The company's share price fell by more than 8% on Friday and were off 1% on Monday. "There is a Wall Street finance person narrative right now that AWS is falling behind in (generative AI) with concerns about (market) share loss," Morgan Stanley analyst Brian Nowak said during the call. "Can you address that and what is your rebuttal to that?" Nowak also acknowledged AWS is a big business -- it's the largest cloud-computing provider in the world -- but asked if there's any reason to assume its growth would accelerate in the back half of the year. That followed a question from Doug Anmuth, an analyst with JPMorgan, who said, "we're seeing significantly faster cloud growth among the No. 2 and 3 players in the space," and asked if Amazon believed that was due more to customer demand or infrastructure supply. Jassy defended the company's cloud growth by saying growth rates are a function of the base -- that it's harder to show growth when starting from a larger number. He said AWS is a "meaningfully larger business" than competitors and that the "second player is about 65% the size of AWS." Microsoft and Google are the second- and third-largest cloud providers. Jassy didn't name competitors, but he jabbed Amazon's cloud peers over security. Microsoft's security issues have repeatedly drawn criticism and government scrutiny, including after a breach that affected private companies and government agencies in July. "For most companies, they're putting data that they really care about in the cloud," Jassy said. "The security and the privacy of that data matters a lot, and there are very different results in security in AWS than you'll see in other players." Amazon doesn't give AWS-specific revenue and profit forecasts, but Jassy said he's optimistic about the division's growth as more companies adopt AI technology. Since AWS is the biggest cloud provider, there's a greater chance a company adopting AI applications will do so on Amazon's cloud. "It is still so early right now in AI," he said. Jassy's answers didn't soothe traders. The company's stock kept sliding through his comments, eventually falling by more than 6% in after-hours trading Thursday, losses that continued Friday. AWS reported $30.8 billion in revenue for the months of April through June, reflecting 18% year-over-year growth. But its main peers, Microsoft and Google, reported 39% and 32% growth for their cloud divisions. Revenue growth is such an intense focus for cloud computing giants because of the billions they're pouring into AI infrastructure and technology. After spending more than $88 billion in capital expenditures over the past year, Microsoft plans to spend another $30 billion by the end of September. Amazon projects it'll spend more than $100 million on investments this year between delivery expansion and AI infrastructure, much of it going toward the latter. Cloud growth has been the key for Microsoft under Nadella, who took over in 2014, but the company has historically obscured the results of its cloud division, Azure. Microsoft would lump revenue from the business in with commercial products like Microsoft 365 or LinkedIn services. On Wednesday, Microsoft's eye-rolling gamesmanship ended. The company reported Azure revenue, showing the division brought in $75 billion for the year, up 34% from the year before. By comparison, AWS is projected to make more than $123 billion this year. Microsoft's earnings felt like a crowning moment for Azure, both on Wall Street and within the company. After Nadella's call with analysts, he shared an internal message with employees reflecting on 15 years of the cloud division. "I still remember what it felt like in the beginning. We were all in. We believed in the arc of technology," he said. "This is what's required to make long-term progress: have a bold vision, complete the thought and persist through all the ups and downs." 2025 The Seattle Times. Distributed by Tribune Content Agency, LLC.

Gloomy guidance and increased cloud competition weigh on Amazon's stock, despite solid earnings beat - SiliconANGLE

Gloomy guidance and increased cloud competition weigh on Amazon's stock, despite solid earnings beat Shares of Amazon.com Inc. were trading more than 6% lower after-hours today, after the e-commerce and cloud computing infrastructure giant could only offer light guidance for the current quarter. The decline came in the wake of some fairly decent numbers from Amazon as it posted its second-quarter financial results, beating Wall Street's targets on earnings and revenue. Amazon reported earnings before certain costs such as stock compensation of $1.68 per share, easily beating the $1.33 per share forecast, while revenue for the quarter came to $167.7 billion, up 13% from a year ago and ahead of the $162.09 billion analyst consensus estimate. The company also reported operating income of $19.2 billion for the quarter, up from $14.7 billion in the year-ago period, while net income came to $18.2 billion, up from $13.5 billion 12 months prior. However, what disturbed investors was the company's miserable operating income outlook. Amazon said this could fall anywhere between $15.5 billion and $20.5 billion, but the midpoint of that range is substantially lower than Wall Street's forecast of $19.48 billion. The guidance appears to have caused panic among investors, who are increasingly concerned about the company's sky-high artificial intelligence investments. Amazon has previously committed to spending up to $100 billion this year on building out the data centers to run AI models, and software that makes use of them. Amazon's stock headed south during a conference call, where Chief Executive Andy Jassy (pictured) was busy fielding some tough questions from analysts regarding the level of spending and the increased competition it faces in the cloud. Jassy did his best to emphasize that Amazon retains a "significant" cloud leadership position, adding that he's "optimistic" about the strength of its AI products and services. "Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I'm excited for what lies ahead," Jassy said in a statement. With regard to the cloud, the Amazon Web Services business unit delivered total sales of $30.87 billion in the quarter, up 18% from a year ago and just ahead of the Street's forecast of $30.8 billion. AWS continues to dominate the cloud computing infrastructure market, but its lead isn't as big as it was, for it faces relentless competition in the face of Microsoft Corp. and Google LLC, and also even smaller players like Oracle Corp. and dedicated AI cloud providers, such as CoreWeave Inc. The company's substantial lead in cloud makes it much harder for AWS to match those rival's growth rates. While AWS revenue was up 18%, Microsoft Azure and Google Cloud recorded growth rates of 39% and 32% in their most recent quarters, which means they're slowly chipping away at Amazon's lead. "We have a meaningfully larger business in the AWS segment than others," Jassy told analysts in response to a question about the threat posed by those rivals. "I think the second player is about 65% of the size of AWS." AWS continues to be a major driver of profit for Amazon, generating operating income of $10.2 billion during the quarter, representing just over half of the company's total. During the quarter, AWS revealed plans to open a new data center region in Chile before 2027, and said Pepsi Co. has signed up for a large multiyear contract that will see it move various critical workloads to the AWS cloud. Jassy insisted that customers continue to choose AWS because they see it as the industry's most secure cloud infrastructure platform. "For most companies, they're putting data that they really care about into the cloud," he told analysts. "The security and privacy of that data matters a lot, and there are very different results in security in AWS than you'll see in other players." The results from Amazon's advertising business were more encouraging, with ad revenue rising 23% from a year earlier to $15.69 billion, surging past the analyst target of $14.99 billion. Of course, the ad business remains much smaller than AWS or the company's retail business, but it's still responsible for a growing chunk of Amazon's profits, as the world's third-largest ad platform, behind only Google and Meta Platforms Inc. Google's parent company Alphabet Inc. last week reported that ad sales were up 10% in its most recent quarter, while Meta said yesterday that its ad revenue climbed 22%, slightly slower than Amazon's. As for retail, sales in Amazon's online stores increased 11% from a year earlier to $61.5 billion, surpassing the Street's target of $59 billion, while the seller services unit delivered $40.3 billion in revenue, also up 11%. Analysts were expecting just $38.7 billion in sales there. Amazon's protection for third-quarter revenue was a little better, at least. The company estimates sales of between $174 billion and $179.5 billion, which would mean growth of between 10% and 13%. That's more optimistic than the Street, with analysts aiming for just $173.1 billion in third-quarter sales. Once again, Amazon's guidance came with a caveat that warned how "recessionary fears" and "tariff and trade policies" could yet impact its results in unforeseen ways. The constantly-shifting trade polices of U.S. President Donald Trump could potentially have a big impact on Amazon's retail business, though consumer spending has so far proven resilient this year. On the conference call, Jassy told analysts that the tariffs haven't impacted on consumer demand, nor have they driven up prices, as some had feared. "If costs end up being a little higher, we will absorb them," he added. The after-hours price drop means that Amazon's stock is up just over 6% in the year to date, trailing the broader S&P 500 Index, which has gained 8% in the same period.

Amazon shares drop on poor outlook, despite strong Q2 results

Stronger than forecast revenues for Amazon still saw a drop in its share price yesterday as analysts expressed concern over a relatively gloomy financial outlook. Yesterday brought good and bad news for Amazon. Despite an excellent quarter two, with net sales up 13pc to $167.7bn, the gloomy financial outlook had traders pressing sell. Shares dropped some 7pc after the earnings announcement. The lower financial outlook was largely due to uncertainty around the effects of the current US tariffs, and the need for major investment in AI, while many analysts on the earnings call questioned the slow rate of growth of Amazon's cloud service AWS compared to its competitors - this despite a 17.5pc growth year on year. "There continues to be a lot of noise about the impact that tariffs will have on retail prices and consumption," said Andy Jassy, President and CEO, Amazon. "As we said before, it's impossible to know what will happen. Where will tariffs finally settle, especially China? What happens when we deplete the inventory we forward bought or that our selling partners forward deployed in advance of the tariffs going into effect? If costs end up being higher, who will absorb them?" On the earnings call Jassy was bullish about AI and automation, flagging that Amazon had deployed its one millionth robot across its global fulfilment network, and had rolled out Deepfleet, its AI which he says improves robot travel efficiency by 10pc. "This combination of robotics and generative AI is just getting started," he said. "And while we've made significant progress, it's still early with respect to what we'll roll out in the next few years." On the earnings call, Jassy was questioned several times on the relatively low growth in AWS cloud services, and he was quick to dismiss that as just "a moment in time", admitting that AWS did not have the supply to meet customer demand. "Year over year percentages and growth rates are always a function of the base in which you operate. And we have a, you know, a meaningfully larger business in the AWS segment than others. I think the second player is about 65pc of the size of AWS." On the supply constraints for AWS, Jassy pointed to unavoidable delays. "The single biggest constraint is power, but you also see constraints off and on with chips and then some of the components to actually make the servers," he said. "I don't believe that we will have fully resolved the amount of capacity we need for the amount of demand that we have in a couple quarters. I think it will take several quarters. But I do expect that it's going to get better each quarter. I'm optimistic about that." Don't miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic's digest of need-to-know sci-tech news.

Amazon reports solid 2Q results and offers better-than-expected sales view despite tariffs

NEW YORK (AP) -- Amazon posted higher fiscal second-quarter profit and sales, helped by its four-day sales event in July and underscoring its resilience despite tariff uncertainty. The Seattle-based company also offered on Thursday a sales outlook for the current quarter that beat analysts' projections. Still, it shares fell 3% in after-market trading. The company also reported 17.5% growth for its prominent cloud computing arm Amazon Web Services. The results come even as uncertainty about President Donald Trump's tariffs have challenged companies and consumers. But Amazon and other large retailers have tried to beat the clock by bringing in foreign goods before Trump's tariffs took effect. Amazon, like many other big retailers, has the clout to negotiate prices with its suppliers. Meanwhile, Amazon is one of the biggest players in the race around generative artificial intelligence. Like other tech companies, it has increased investments in the technology and is spending billions to expand data centers that power AI and cloud computing. The company is also investing in its own computer chips and those developed by Nvidia. It has also expanded its own AI models and integrated generative AI into other parts of its business. In March Amazon began testing AI-aided dubbing for select movies and shows offered on its Prime streaming service. A month earlier, the company rolled out a generative-AI infused Alexa. Company CEO Andy Jassy anticipates generative AI will also allow Amazon to reduce its corporate workforce in the next few years. Amazon earned $18.16 billion, or $1.68 per share, for the quarter ended June 30. That's up from $13.49 billion, or $1.26 per share, in the year-ago period. Revenue rose to $167.7 billion from $147.9 billion a year ago. The company's sales were helped by Amazon's Prime event amid tariff-related price worries. For the first time, Amazon held Prime Day over four days instead of two. Analysts expected earnings per share of $1.33 on sales of $162.19 billion for the quarter, according to FactSet. The company said it expects sales for the current quarter of between $174 billion and $179.5 billion. Analysts expected $173.27 billion for the current quarter, according to FactSet.

Why is Microsoft soaring while Amazon sinks? AI growing pains

Wall Street analysts who follow tech and cloud computing were all but popping Champagne on Wednesday. Microsoft had reported stellar financial results and strong growth that could be connected to artificial intelligence. After the market closed, extended-hours trading shot Microsoft's share price up by as much as 9%. The next day, Microsoft was briefly valued at $4 trillion. (Though, as all good celebrations do, the rally ended on Friday as Microsoft's share price fell by almost 2%.) For Microsoft CEO Satya Nadella and Chief Financial Officer Amy Hood, during a Wednesday call with analysts, almost every question began with some sort of congratulations. "I've been covering Microsoft for a while and I don't think I've ever seen a quarter where everything came together this well," said Keith Weiss, an analyst with Morgan Stanley, who asked the first question on the call with Microsoft brass. "Congratulations on that execution." Then on Thursday, when Amazon CEO Andy Jassy and Chief Financial Officer Brian Olsavsky answered questions from analysts, the mood chilled. Amazon's cloud computing division, Amazon Web Services, reported revenue that beat estimates, but Wall Street was underwhelmed by the growth. The company's share price fell by more than 8% on Friday. "There is a Wall Street finance person narrative right now that AWS is falling behind in (generative AI) with concerns about (market) share loss," Morgan Stanley analyst Brian Nowak said during the call. "Can you address that and what is your rebuttal to that?" Nowak also acknowledged AWS is a big business -- it's the largest cloud-computing provider in the world -- but asked if there's any reason to assume its growth would accelerate in the back half of the year. That followed a question from Doug Anmuth, an analyst with JPMorgan, who said, "we're seeing significantly faster cloud growth among the No. 2 and 3 players in the space," and asked if Amazon believed that was due more to customer demand or infrastructure supply. Jassy defended the company's cloud growth by saying growth rates are a function of the base - that it's harder to show growth when starting from a larger number. He said AWS is a "meaningfully larger business" than competitors and that the "second player is about 65% the size of AWS." Microsoft and Google are the second- and third-largest cloud providers. Jassy didn't name competitors, but he jabbed Amazon's cloud peers over security. Microsoft's security issues have repeatedly drawn criticism and government scrutiny, including after a breach that affected private companies and government agencies in July. "For most companies, they're putting data that they really care about in the cloud," Jassy said. "The security and the privacy of that data matters a lot, and there are very different results in security in AWS than you'll see in other players." Amazon doesn't give AWS-specific revenue and profit forecasts, but Jassy said he's optimistic about the division's growth as more companies adopt AI technology. Since AWS is the biggest cloud provider, there's a greater chance a company adopting AI applications will do so on Amazon's cloud. "It is still so early right now in AI," he said. Jassy's answers didn't soothe traders. The company's stock kept sliding through his comments, eventually falling by more than 6% in after-hours trading Thursday, losses that continued Friday. AWS reported $30.8 billion in revenue for the months of April through June, reflecting 18% year-over-year growth. But its main peers, Microsoft and Google, reported 39% and 32% growth for their cloud divisions. Revenue growth is such an intense focus for cloud computing giants because of the billions they're pouring into AI infrastructure and technology. After spending more than $88 billion in capital expenditures over the past year, Microsoft plans to spend another $30 billion by the end of September. Amazon projects it'll spend more than $100 million on investments this year between delivery expansion and AI infrastructure, much of it going toward the latter. Cloud growth has been the key for Microsoft under Nadella, who took over in 2014, but the company has historically obscured the results of its cloud division, Azure. Microsoft would lump revenue from the business in with commercial products like Microsoft 365 or LinkedIn services. On Wednesday, Microsoft's eye-rolling gamesmanship ended. The company reported Azure revenue, showing the division brought in $75 billion for the year, up 34% from the year before. By comparison, AWS is projected to make more than $123 billion this year. Microsoft's earnings felt like a crowning moment for Azure, both on Wall Street and within the company. After Nadella's call with analysts, he shared an internal message with employees reflecting on 15 years of the cloud division. "I still remember what it felt like in the beginning. We were all in. We believed in the arc of technology," he said. "This is what's required to make long-term progress: have a bold vision, complete the thought and persist through all the ups and downs."

Amazon Projects Quarterly Revenue Above Market Estimates

(Reuters) -Amazon.com forecast current-quarter revenue above market estimates on Thursday, encouraged by solid retail business despite pressures from U.S. tariffs on imports, while its cloud computing unit also benefits from strong AI demand. The company expects net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. Shares of the company, however, fell about 1% in choppy extended trading. Amazon Web Services, the company's cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. Blockbuster cloud revenue growth at Microsoft and Alphabet's Google raised expectations for Amazon's cloud unit, Amazon Web Services, the world's largest cloud provider. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. Though a small part of Amazon's total revenue, AWS is a key driver of Amazon's profits, typically accounting for about 60% of the company's overall operating income. AWS reported 16.9% growth in the first quarter. While Amazon has poured billions into AI infrastructure, analysts have said that the lack of a strong AI model from AWS is causing some concerns that the company could be trailing behind rivals in AI development, analysts said. Meanwhile, President Trump's tariffs have dampened the U.S. retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact. In the past, Trump has said the levies will bring manufacturing power and jobs back to the U.S. Investors have been closely watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June. Analysts had said Amazon's focus on low prices, quick delivery and the sheer number of product categories have helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. (Reporting by Deborah Sophia in Bengaluru; Editing by David Gregorio)

Amazon cloud computing results fail to impress, shares dive - The Economic Times

Amazon forecast strong Q3 sales but disappointed on cloud performance, with AWS margins falling to 32.9% and growth lagging behind Microsoft and Google. Shares dropped over 7%. Despite solid retail and ad revenue, concerns over tariffs, weak AI progress, and rising costs have investors questioning Amazon's competitive edge in cloud computing.Amazon.com on Thursday forecast third-quarter sales above market estimates, but failed to live up to lofty expectations for its Amazon Web Services cloud computing unit after rivals handily beat Wall Street forecasts. Shares plunged by more than 7% after-hours. Before releasing the results, Amazon had finished regular trading up 1.7% to $234.11. Both Google-parent Alphabet and Microsoft posted big cloud computing revenue gains this month. AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, down from 39.5% in this year's first quarter and 35.5% a year ago. The second-quarter margin results were at their lowest level since the final quarter of 2023. "AWS is their growth engine and to see that drop in margin is dropping the stock," said Ken Mahoney, CEO of Mahoney Asset Management. "The market was looking for further fireworks to take this up back to new highs and beyond." AWS reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. By comparison, sales for Microsoft's Azure rose 39% and Google Cloud gained 32%. Amazon expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. The range for operating income in the current quarter was also light. Amazon forecast between $15.5 billion and $20.5 billion, compared with expectations of $19.45 billion. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. AWS represents a small part of Amazon's total revenue, but it is a key driver of profits, typically accounting for about 60% of Amazon's overall operating income. While Amazon has poured billions of dollars into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing concerns that the company could be trailing rivals in AI development. The AWS results are "alarming," said Dave Wagner, portfolio manager for Aptus Capital Advisers, which holds Amazon shares. "Amazon is an operating leverage story and they had to be able to grow, at least relative to costs. And they haven't done it. The largest tech companies have been boosting capital expenditures to add more data center capacity, particularly for artificial intelligence software deployment and development. Amazon said it expected second-half spending roughly the same as its second quarter total of $31.4 billion, suggesting it would spend around $118 billion for the full year. Analysts had projected about $100 billion. On Wednesday, Microsoft said it would spend a record $30 billion in the current quarter. Google-parent Alphabet raised its spending forecast by $10 billion to $85 billion for the year. Seattle-based Amazon posted online store sales of $61.5 billion, an 11% gain. Advertising sales, a fast-growing segment for Amazon, were up 23% to $15.7 billion. Investors have been watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June. CEO Andy Jassy, in a call with analysts, addressed concerns about the impacts of tariffs on Amazon's core retail business. "Through the first half of the year, we haven't yet seen diminishing demand nor prices meaningfully appreciating," he said on a call with analysts. "We also have such diversity of sellers in our marketplace, over 2 million sellers in total, with differing strategies of whether to pass on higher costs to consumers." He added: "We just don't know what's going to happen moving forward. It's hard to know where the tariffs are going to settle, particularly in China." President Donald Trump's tariffs have major retailers and consumer goods companies scrambling to protect margins while trying not to hurt consumer demand. Trump has said the levies will bring manufacturing power and jobs back to the U.S. Analysts had said Amazon's focus on low prices, quick delivery and its many product categories helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. Amazon has been trimming jobs, including at its AWS, books, devices and podcasting units. Headcount fell by 14,000 workers from this year's first quarter, bringing the total to 1.46 million, the first decline since the beginning of 2024.

Amazon shares tumble 7% after cloud computing growth disappoints investors

Amazon.com shares fell about 7% on Friday as the tech giant's results fanned investor fears its cloud unit was falling behind Microsoft and Alphabet in the artificial intelligence race. Amazon.com shares fell about 7% on Friday as the tech giant's results fanned investor fears its cloud unit was falling behind Microsoft and Alphabet in the artificial intelligence race. Amazon Web Services, long the cloud-computing market leader, edged past Wall Street estimates for June-quarter revenue on Thursday with a 17.5% increase, but it widely lagged the 39% growth seen at Microsoft Azure and Google Cloud's 32% gain. That disappointing growth came even as Amazon shelled out $31.4 billion in capital expenditure, more than rivals, and suggested it would spend a more-than-estimated $118 billion for the year. Google and Microsoft also pledged higher spending, but were rewarded from investors on signs AI was already becoming a major growth driver across their businesses, justifying the bill. The companies have been spending billions of dollars on datacenters and cutting-edge chips that they say are necessary to overcome supply constraints hampering their efforts to capitalize on soaring demand for AI services. "The spotlight was firmly on AWS and it didn't quite shine as brightly as expected," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn't the knockout many wanted to see." Growing expenses have also started to take a bite out of AWS's margins, the business that has long been Amazon's profit engine, accounting for about 60% of its operating income. AWS margins contracted to 32.9% during the quarter, their lowest level since the final quarter of 2023, and Amazon also issued a current-quarter total operating income forecast that was lower than market estimates. CEO Andy Jassy told analysts on a post-earnings call that it was still "very early days" in the AI race and that Amazon's massive cloud business, much larger than rivals, was primed to perform well once the AI capacity constraints start to ease. The stock, up 6.7% so far this year, was at $216.6 in early trading. The drop was set to erase around $170 billion from Amazon's market value, if the losses hold. The company still trades at a relatively high premium, with a 12-month forward price-to-earnings ratio of 33.87, compared with Microsoft's 34.19 and Alphabet's 18.64, according to data compiled by LSEG. RETAIL RESILIENCE At least 30 analysts raised their price targets on the stock, while three lowered, giving it a median view of $260. Some of that analyst confidence comes from the strong performance of Amazon's retail business, which has remained resilient in the face of Trump administration tariffs that have hobbled many retailers and their supply chains. Amazon has yet to see a drop in demand or a notable rise in prices in the first half of the year, Jassy said, as its online store sales jumped a better-than-expected 11% in the second quarter. Manufacturers and suppliers have shouldered most of the tariff impact so far, analysts said, but noted that much of the inventory Amazon sold in the quarter arrived in the preceding three-month period. "If Amazon's retail business was a standalone entity, it would be trading dramatically higher following the near-perfect results," said Michael Morton, analyst at MoffettNathanson. "Unfortunately, as we all know, the success of the retail business is not what's going to matter in the near term for Amazon's stock price."

Amazon Stock Tanks As AWS Misses Whisper Number: 'I Don't Know What's Wrong With It,' Says Gene Munster - Alphabet (NASDAQ:GOOG), Amazon.com (NASDAQ:AMZN)

Amazon.com Inc. AMZN delivered a strong second quarter but missed expectations on cloud growth, sending shares tumbling and prompting concern from analysts over Amazon Web Services' momentum. Trending Investment Opportunities Advertisement AWS Misses Growth Whisper, Sparks Analyst Alarm Amazon reported second-quarter net sales of $167.7 billion, a 13% increase year-over-year and above consensus estimates of $161.9 billion. However, AWS revenue came in at $10.2 billion, representing 17.5% growth -- well below the "whisper number" of 20% that some analysts, including Deepwater Asset Management's Gene Munster, had expected. "AWS is what's wrong," Munster said during an appearance on CNBC. "The whisper was plus 20% growth. I thought it was going to be like 22%. They did 17.5%." See Also: Magnificent Seven Now Worth Over $19 Trillion -- And They Make Up 35% Of The S&P 500 Gene Munster Points To Share Loss Versus Azure, Google Cloud Munster pointed to Amazon's underperformance compared to Microsoft Corporation's MSFT Azure and Alphabet Inc.'s GOOG GOOGL Google Cloud. "They have been losing share over the past couple of years. They lost at a greater pace in the June quarter. That's a problem," he said. Google Cloud reported revenue of $13.62 billion for the quarter, up from $10.35 billion a year ago, while Microsoft CEO Satya Nadella announced that Azure crossed the $75 billion revenue mark for the full fiscal year, reflecting a 34% year-over-year growth. While Amazon attributed the miss partly to capacity constraints, Munster wasn't fully convinced. "They would have to be really supply-constrained to justify that number," he said. "There just is still something deeper here." AI Integration May Be Giving Microsoft The Edge When asked whether Microsoft is simply doing a better job of integrating AI into Azure, Munster said, "Yeah, I think that they're probably just doing a better job of integrating those AI models into the overall system. That's Azure. It's just been a Cloud First company for Azure." Slowing AWS Growth Clouds Margin Outlook AWS is Amazon's profit engine, and its slowing growth has significant implications for the company's margins and future investment capacity. While Amazon's operating margins improved overall -- rising from 3.5% to 11.4% in two years -- Munster said that "it's all about AWS." "I don't know what's wrong with it. I don't know why it shouldn't be growing faster, given all the goodness that's happening in the cloud side," he said. Amazon Offers Strong Q3 Guidance, But Investors Focus On Cloud Amazon did offer upbeat guidance for the third quarter, with the high end of its revenue forecast implying 13% growth, ahead of Street estimates. Still, the AWS miss weighed heavily on investor sentiment. "Management noted on the call that growth was capacity-constrained, with backlog up 25%," Munster later posted on X, formerly Twitter, "offsetting some of my initial disappointment." Price Action: Amazon shares fell 6.63% to $228.55 in after-hours trading, according to Benzinga Pro. Despite the drop, Benzinga's Edge Stock Rankings indicate that AMZN maintains strong upward momentum across short, medium and long-term timeframes. Additional performance data is available here. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo by Deep Pixel via Shutterstock AMZNAmazon.com Inc $218.60-5.03% Stock Score Locked: Edge Members Only Benzinga Rankings give you vital metrics on any stock - anytime. Unlock Rankings Edge Rankings Momentum 67.02 Growth 97.35 Quality 65.28 Value 49.14 Price Trend Short Medium Long Overview GOOGAlphabet Inc $191.64-2.94% GOOGLAlphabet Inc $190.50-3.07% MSFTMicrosoft Corp $537.544.73% Market News and Data brought to you by Benzinga APIs

Amazon Post-Earnings Decline 'Totally Wrong,' Says Analyst As CEO Points Out AWS Has 'More Demand Than We Have Capacity' - Invesco QQQ Trust, Series 1 (NASDAQ:QQQ), Amazon.com (NASDAQ:AMZN)

Following its second-quarter earnings report, Amazon.com Inc.'s AMZN stock experienced a significant sell-off. However, a closer look at the details from the earnings call reveals that the primary reason for the slowdown in Amazon's cloud business, Amazon Web Services (AWS), is not a lack of demand, but a severe capacity issue, with CEO Andy Jassy specifically identifying power as the "single biggest constraint." Check out the AMZN stock price over here. What Happened: Even though the market appeared to react negatively to the 17% year-over-year revenue growth reported by AWS, Eric Allen, co-founder at Stealth, suggested in an X post that the market's reaction was "totally wrong." Additionally, according to a chart from Fiscal.ai, AWS trailed behind Microsoft's Azure at 30% and Google Cloud at 20% for the same quarter. Despite this, the company's backlog figure, as reported by Vice President of Investor Relations, Dave Files, was a staggering $195 billion at the end of the quarter, up 25% year over year. This figure strongly supports CEO Jassy's comments about the capacity issue on the earnings call. "We have more demand than we have capacity at this point," Jassy stated. "And I think that and you see, you know, some of the constraints, and they kind of exist in multiple places. The single biggest constraint is power." Jassy also mentioned other challenges with chips and components for building servers and noted that he doesn't believe the capacity issue will be fully resolved "in a couple of quarters." This sentiment was echoed by the tech expert Allen, who criticized the market's interpretation. "As usual, market gets $AMZN and AWS totally wrong," he posted. "There's Literally a power capacity issue and a backlog of demand AWS as explained by CEO. Yet market sees 17% YoY and decided not fast enough so they sell off. Dummies. Long AMZN." Allen's analysis highlights the central conflict: the market is punishing Amazon for a growth rate that is constrained by supply, not demand, which is arguably a more favorable long-term problem for a company to have. Trending Investment OpportunitiesAdvertisementArrivedBuy shares of homes and vacation rentals for as little as $100. Get StartedWiserAdvisorGet matched with a trusted, local financial advisor for free.Get StartedPoint.comTap into your home's equity to consolidate debt or fund a renovation.Get StartedRobinhoodMove your 401k to Robinhood and get a 3% match on deposits.Get Started See Also: Trump Slams Canada's Palestine Recognition As Roadblock In Trade Deal -- Signs Agreement With Pakistan That Doesn't Even Recognize Israel Why It Matters: Amazon reported second-quarter net sales of $167.7 billion, up 13% year-over-year. The net sales total beat a Street consensus estimate of $161.9 billion. Meanwhile, its quarterly earnings per share of $1.68 beat a Street estimate of $1.30. The company expects third-quarter net sales to come in a range between $174.0 billion and $179.5 billion, versus a Street estimate of $172.8 billion. It expects operating income to be in a range of $15.5 billion to $20.5 billion, compared to $17.4 billion in the third quarter of 2024. Price Action: AMZN stock fell 7.55% in premarket on Friday after declining by 6.63% in after-hours on Thursday. The stock was up 6.31% year-to-date and 27.19% over a year. Benzinga's Edge Stock Rankings indicate that AMZN maintains a strong price trend across the short, medium, and long term. However, the stock scores moderately on value rankings. Additional performance details are available here. The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, were lower in premarket on Thursday. The SPY was down 0.38% at $632.08, while the QQQ declined 0.53% to $565.01, according to Benzinga Pro data. Read Next: Mark Cuban Says Cutting PBM Fees Won't Reduce Pharmaceutical R&D Funding: 'Manufacturers Can Sell To Us For More' Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Image Via Imagn Images AMZNAmazon.com Inc$216.16-7.67%Stock Score Locked: Edge Members Only Benzinga Rankings give you vital metrics on any stock - anytime. Unlock RankingsEdge RankingsMomentum72.05Growth97.41Quality66.55Value48.94Price TrendShortMediumLongOverviewQQQInvesco QQQ Trust, Series 1$559.23-1.02%SPYSPDR S&P 500$626.37-0.90%Market News and Data brought to you by Benzinga APIs

Is Amazon's Golden Goose Turning Into a Red Flag? | The Motley Fool

For years, Amazon's (AMZN 0.94%) cloud computing division, Amazon Web Services (AWS), has been the company's No. 1 cash cow, driving the majority of its profits. The company is best known to consumers for its huge e-commerce business, but savvy investors know that AWS has been the real story here. At one point, some prominent investors argued that based on a sum-of-the-parts analysis, investors were getting the e-commerce business for free since AWS could account for the entire valuation of the stock on its own. However, these days, the shine may be coming off AWS. Amazon stock tumbled on its second-quarter earnings report last week, falling 8% even though it beat estimates on the top and bottom lines. Instead, the sell-off seemed to be driven by weakness in the cloud-computing unit. Revenue at AWS rose 17.5% to $30.9 billion, which was slightly better than expectations at $30.77 billion. But that growth rate was much worse than what was reported by chief rivals Microsoft Azure and Alphabet's Google Cloud at 39% and 32%, respectively. Also, AWS profit margins contracted in the quarter, falling from 35.5% in the quarter a year ago to 32.9%, its lowest level since the fourth quarter of 2023, and operating income at AWS rose less than 10%, going from $9.3 billion to $10.2 billion. Improvements at the e-commerce business helped offset that weakness, but slowing growth from AWS could be a red flag for a stock that has soared to a valuation north of $2 trillion in large part because of the success of that segment, which is still the leading cloud computing business. The biggest concern for Amazon investors right now is that while AWS remains the largest cloud infrastructure platform, its smaller rivals are growing much faster than it is, showing they may be beating it in the artificial intelligence (AI) race. For example, Azure's growth rate was more than double that of AWS in the June quarter. Although 17% growth isn't shabby for a business the size of AWS, given the conditions in the industry -- with AI spending surging and its rivals growing faster than 30% -- investors have to ask what happens to AWS in a weaker macroeconomic environment or if the AI boom fizzles. Given its current underperformance, it seems likely that its growth would fall to single digits or potentially turn negative. Gil Luria, an analyst at D.A. Davidson, called the AWS results "very disappointing" and said that Azure could surpass AWS as the top cloud infrastructure business by the end of the year. On its earnings call, Amazon noted that demand is outpacing capacity at AWS. That should be good news and could explain the slower growth. But even with that dynamic, the company saw margins compress, indicating it could be losing higher-value business to Alphabet and Microsoft, both of which have been at the forefront of the AI race while Amazon arguably got off a slow start. Amazon is stepping up its capital expenditures in the second half of the year in order to provide more capacity, and free cash flow has been negative for the first half of the year, showing that the company has already accelerated infrastructure spending to add new data centers to support cloud growth. There's no single reason Amazon is losing market share in cloud computing to Google and Microsoft, a trend that has now gone on for several quarters, but there are a number of factors at play here. First, Amazon invented and pioneered cloud infrastructure services, and it had a seven-year head start, according to company founder Jeff Bezos. Naturally, as Amazon has shown the massive market for cloud computing, Alphabet and Microsoft have hustled to close the gap. Those two competitors also have their own advantages in the industry. Microsoft is the leading enterprise software company. And for businesses that are already using Microsoft for services from Windows to Office to Dynamics ERP, keeping your data in Azure rather than AWS might make more sense. Google Cloud, meanwhile, is a leader in AI and analytics, and it's also known for its open-source and developer-centric approach. Both challengers have also become more price-competitive with Amazon over the years. Overall, AWS, which generated more than $10 billion in operating income in the second quarter, remains a golden goose for the company, and its relatively slow growth isn't a reason to sell Amazon stock. Nonetheless, investors should pay attention to its performance over the coming quarters. If its growth slows further or the gap widens with its rivals, that could weigh further on the stock. On the other hand, based on management's statement that demand is outstripping supply, investors should expect AWS' growth to accelerate in the coming quarter as it moves through its capital expenditure cycle. The next few quarters of results should be telling for the future of AWS. If the cloud business continues to disappoint, expect Amazon stock to head lower.

Amazon: Capex Weighs on Profit Forecast | The Motley Fool

Investors had big expectations for Amazon, and in particular the company's AWS cloud unit, following strong results from Microsoft (MSFT 3.94%). Amazon revenue and earnings were up 13% and 33%, respectively, beating expectations, and AWS sales grew by 17% to $30.9 billion. Amazon's release boasted about its largest Prime Day to date and new partnerships including a Nike (NKE -2.67%) storefront. But the focus was clearly on AI. CEO Andy Jassy in a statement said that "our conviction that AI will change every customer experience is starting to play out," noting the company's moves not just at AWS but across Alexa, robotics, and other areas. Amazon sees more growth ahead, predicting net sales to come in between $174 billion and $179.5 billion in the current quarter. That would be up 10% to 13% from a year ago, and even at the low end is above the $173 billion consensus. But all of that growth is coming at a price. Operating expenses in the quarter were up 11% to $148.5 billion, and free cash flow decreased to $18.2 billion for the trailing 12 months, from $53 billion a year ago. AWS's operating margin for the quarter fell to 32.9%, from 35.5% a year ago. Operating income in the current quarter is expected to come in between $15.5 billion and $20.5 billion. At the midpoint that suggests little growth over last year's $17.4 billion, and is slightly below analyst expectations. Investors were underwhelmed by the results. Amazon shares fell 3% in aftermarket trading following the release of the report but ahead of the company's call with investors. The AWS growth, while impressive, on a percentage basis fell short of Microsoft's reported 34% growth at Azure. Microsoft surged post-earnings because the company successfully articulated the benefit of all of the AI spending. Investors will be eager to hear Jassy and other Amazon execs make the same case on the earnings call. Amazon is a lot more than AWS, posting 11% growth in product sales to $68 billion, while its advertising business was up 23% year over year. The company remains well positioned on many fronts, and is set up well to be a long-term winner. But in an environment where all eyes are on the investment -- and payoff -- of AI, investors have set a high bar on results and outlook.

Amazon shares fall on weak cloud growth while rivals Google,...

Amazon on Thursday forecast third-quarter sales above market estimates, but failed to live up to lofty expectations for its Amazon Web Services cloud computing unit after rivals handily beat expectations. Shares fell by more than 3% in after-hours trading after finishing regular trading up 1.7% to $234.11. Both Google-parent Alphabet and Microsoft posted big cloud computing revenue gains this month. AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, down from 39.5% in this year's first quarter and 35.5% a year ago. The second-quarter margin results were at their lowest level since the final quarter of 2023. AWS, the cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. By comparison, sales for Microsoft's Azure rose 39% and Google Cloud gained 32%. After competitors' strong showing, "AWS is lingering at 17% growth," said Gil Luria, a D.A. Davidson analyst. "That is very disappointing, even to the point where if Microsoft's Azure continues to grow at these rates, it may overtake AWS as the largest cloud provider by the end of next year." Amazon expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. The range for operating income in the current quarter was also light. Amazon forecast between $15.5 billion and $20.5 billion, compared with expectations of $19.45 billion. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. AWS represents a small part of Amazon's total revenue, but it is a key driver of profits, typically accounting for about 60% of Amazon's overall operating income. While Amazon has poured billions of dollars into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing concerns that the company could be trailing rivals in AI development. The AWS results are "alarming," said Dave Wagner, portfolio manager for Aptus Capital Advisers, which holds Amazon shares. "Amazon is an operating leverage story and they had to be able to grow, at least relative to costs. And they haven't done it." The Seattle-based retailer posted online store sales of $61.5 billion, an 11% gain. Advertising sales, a fast-growing segment for Amazon, were up 23% to $15.7 billion. Investors have been watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. US data showed consumer spending rose moderately in June. President Trump's tariffs have dampened the US retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact. Trump has said the levies will bring manufacturing power and jobs back to the US. Analysts had said Amazon's focus on low prices, quick delivery and the sheer number of product categories helped cement its position as the No. 1 e-commerce retailer for US consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. The company has been trimming jobs in its corporate offices, including at its AWS, books, devices and podcasting units. Its efforts were showing results: headcount fell by 14,000 workers from this year's first quarter, bringing the total to 1.46 million.

Amazon tumbles after cloud computing growth disappoints investors

Amazon.com shares fell seven per cent on Friday as the tech giant's results fanned investor fears its cloud unit was falling behind Microsoft and Alphabet in the artificial intelligence race. Amazon Web Services, long the cloud-computing market leader, edged past Wall Street estimates for June-quarter revenue on Thursday with a 17.5 per cent increase, but it widely lagged the 39 per cent growth seen at Microsoft Azure and Google Cloud's 32 per cent gain. That disappointing growth came even as Amazon shelled out US$31.4 billion in capital expenditure, more than rivals, and suggested it would spend a more-than-estimated $118 billion for the year. Google and Microsoft also pledged higher spending, but were rewarded from investors on signs AI was already becoming a major growth driver across their businesses, justifying the bill. The companies have been spending billions of dollars on datacenters and cutting-edge chips that they say are necessary to overcome supply constraints hampering their efforts to capitalize on soaring demand for AI services. "The spotlight was firmly on AWS and it didn't quite shine as brightly as expected," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "While Microsoft and Alphabet have already shown strong momentum in cloud growth, AWS wasn't the knockout many wanted to see." Growing expenses have also started to take a bite out of AWS's margins, the business that has long been Amazon's profit engine, accounting for about 60 per cent of its operating income. AWS margins contracted to 32.9 per cent during the quarter, their lowest level since the final quarter of 2023, and Amazon also issued a current-quarter total operating income forecast that was lower than market estimates. CEO Andy Jassy told analysts on a post-earnings call that it was still "very early days" in the AI race and that Amazon's massive cloud business, much larger than rivals, was primed to perform well once the AI capacity constraints start to ease. The stock, now down 1.5 per cent for the year, was at $216.2 in late morning trading. The drop was set to erase around $170 billion from Amazon's market value, if the losses hold. The company still trades at a relatively high premium, with a 12-month forward price-to-earnings ratio of 33.87, compared with Microsoft's 34.19 and Alphabet's 18.64, according to data compiled by LSEG. At least 30 analysts raised their price targets on the stock, while three lowered, giving it a median view of $260. Some of that analyst confidence comes from the strong performance of Amazon's retail business, which has remained resilient in the face of Trump administration tariffs that have hobbled many retailers and their supply chains. Amazon has yet to see a drop in demand or a notable rise in prices in the first half of the year, Jassy said, as its online store sales jumped a better-than-expected 11 per cent in the second quarter. Manufacturers and suppliers have shouldered most of the tariff impact so far, analysts said, but noted that much of the inventory Amazon sold in the quarter arrived in the preceding three-month period. "If Amazon's retail business was a standalone entity, it would be trading dramatically higher following the near-perfect results," said Michael Morton, analyst at MoffettNathanson. "Unfortunately, as we all know, the success of the retail business is not what's going to matter in the near term for Amazon's stock price."

Amazon cloud computing results fail to impress, shares drop after hour

(Reuters) -Amazon.com forecast third-quarter sales above market estimates on Thursday but failed to live up to lofty expectations for its Amazon Web Services cloud computing unit after rivals handily beat expectations. Shares fell by more than 2% in after-market trading after finishing regular trading up 1.7% to $234.11. Both Google-parent Alphabet and Microsoft posted big cloud computing revenue gains earlier this month. AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, compared with 39.5% in this year's first quarter and 35.5% a year ago. AWS, the cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. The company expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG. Blockbuster cloud revenue growth at Microsoft and Alphabet's Google raised expectations for AWS, the world's largest cloud provider. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand. AWS represents a small part of Amazon's total revenue, but it is a key driver of profits, typically accounting for about 60% of Amazon's overall operating income. While Amazon has poured billions into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing some concerns that the company could be trailing rivals in AI development, analysts said. President Donald Trump's tariffs have dampened the U.S. retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact. Trump has said the levies will bring manufacturing power and jobs back to the U.S. Investors have been closely watching Amazon's e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June. Analysts had said Amazon's focus on low prices, quick delivery and the sheer number of product categories has helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals. Amazon has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com have been rising faster than overall inflation, Reuters reported last month. (Reporting by Deborah Sophia in Bengaluru; Editing by David Gregorio) By Deborah Mary Sophia and Greg Bensinger

Amazon reports solid 2Q results and offers better-than-expected sales view despite tariffs

NEW YORK (AP) -- Amazon posted higher fiscal second-quarter profit and sales, underscoring its resilience despite tariff uncertainty. The -based company also offered on Thursday a sales outlook for the current quarter that beat analysts' projections. Still, it shares fell 5% in after-market trading. The company reported 17.5% growth for its prominent cloud computing arm . The results come even as uncertainty about President Donald Trump's tariffs have challenged companies and consumers. But and other large retailers have tried to beat the clock by bringing in foreign goods before Trump's tariffs took effect. , like many other big retailers, has the clout to negotiate prices with its suppliers. Meanwhile, is one of the biggest players in the race around generative artificial intelligence. Like other tech companies, it has increased investments in the technology and is spending billions to expand data centers that power AI and cloud computing. The company is also investing in its own computer chips and those developed by . It has also expanded its own AI models and integrated generative AI into other parts of its business. In March began testing AI-aided dubbing for select movies and shows offered on its Prime streaming service. A month earlier, the company rolled out a generative-AI infused Alexa. Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. , source