Amazon Shares Slide as Cloud Growth Misses Estimates

Image Credit: Reuters

Amazon.com shares tumbled on Thursday as investors reacted to weaker-than-expected performance in the company’s cloud computing division and lower guidance for first-quarter revenue and profit.  

The stock dropped as much as 5% in extended trading following Amazon’s fourth-quarter earnings report, wiping out roughly $90 billion in market value before recovering slightly to a 4.2% decline.  

Chief Financial Officer Brian Olsavsky stated that capital expenditures for this year are expected to remain in line with the $26.3 billion spent in the final quarter of last year, with a significant portion allocated to artificial intelligence development.  

Amazon’s projected revenue for the first quarter fell short of analyst expectations, even after accounting for a $2 billion negative impact from last year’s Leap Day. The company forecasted revenue between $151 billion and $155 billion, below the market’s average estimate of $158 billion.  

Amazon Web Services (AWS) reported a 19% increase in revenue to $28.79 billion, narrowly missing the $28.87 billion consensus forecast compiled by LSEG. The slowdown mirrors similar trends at Microsoft and Google, both of which reported weaker cloud growth.  

CEO Andy Jassy attributed some of AWS’s slower growth to supply chain issues, particularly delays in receiving computer chips from third-party suppliers. "We could be growing faster if not for constraints on capacity, specifically chip availability from our partners," Jassy told investors during a conference call.  

The cloud sector’s sluggish performance has frustrated investors, who are increasingly seeking returns on the billions of dollars that major tech companies have invested in AI.  

"After exceptionally strong results in the third quarter, this quarter’s growth rates were disappointing. That’s exactly what the market didn’t want to see," said Daniel Morgan, senior portfolio manager at Synovus Trust, highlighting rising competition in AI from emerging players like China’s DeepSeek.  

Like its rivals, Amazon has been making substantial investments in artificial intelligence. At its AWS conference in December, the company introduced new AI models aimed at attracting both business and consumer clients. Later this month, Amazon is expected to launch its long-awaited Alexa generative AI voice service, which faced delays due to concerns over quality and speed, according to a recent Reuters report.  

Microsoft and Google’s parent company, Alphabet, also saw slowing cloud growth in the fourth quarter of last year, triggering share price declines. Along with Meta Platforms, the three companies anticipate a combined capital expenditure of approximately $230 billion in 2025, driven largely by AI infrastructure investments.  

Amazon’s retail segment provided some balance to the cloud business struggles, with online sales rising 7% to $75.56 billion, surpassing expectations of $74.55 billion.  

For the first quarter of 2025, Amazon projected an operating profit of $14 billion to $18 billion, slightly below analysts' average estimate of $18.35 billion.  

The company reported total revenue of $187.8 billion for the fourth quarter, slightly exceeding the average analyst estimate of $187.3 billion, according to LSEG data.  

Advertising sales, another key metric, climbed 18% to $17.3 billion, just below the projected $17.4 billio

Amazon’s net income nearly doubled year-over-year, reaching $20 billion compared to $10.6 billion a year ago. Earnings per share came in at $1.86, significantly beating expectations of $1.49 per share.

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.