Amazon (AMZN) stock fell 8% in afternoon trading Friday after the retail and cloud giant delivered current-quarter forecasts on Thursday that missed expectations on both the top and bottom lines.
The disappointing returns were compounded by a weak July jobs report, which sent the tech world and the broader market into the red.
In the third quarter, Amazon forecast sales of between $154 billion and $158.5 billion, compared with analysts’ expectations of $158.43 billion, according to Bloomberg data. Its operating income in the third quarter is expected to be between $11.5 billion and $15 billion. Wall Street had expected operating income of about $15.2 billion.
The report capped a wave of results from big tech companies that have warned that investors have limited patience for massive spending on artificial intelligence. Any weakness in the underlying businesses has heightened scrutiny on Wall Street.
Although Amazon posted earnings per share of $1.26, beating estimates of $1.04 and nearly doubling earnings from the same period last year, investors instead focused on the report’s weaknesses.
Amazon reported revenue of $148 billion, slightly below the $148.8 billion analysts had expected, but even that slight margin didn’t make a good impression.
The company’s thriving advertising segment, which has routinely grown by double-digit percentages, continued to show strength, but that segment also came in slightly below expectations, recording $12.8 billion in revenue versus the $13 billion expected.
The bright spot in the report was its cloud computing business, Amazon Web Services. AWS generated $26.3 billion in revenue, compared to the $26 billion expected and well above the $22.1 billion in the same period last year.
Amazon CFO Brian Olsavsky told reporters on a post-earnings call that AWS is on track to generate more than $105 billion annually.
Like many of its peers, Amazon is investing heavily in infrastructure to support the rapid deployment of new AI technologies and cloud services.
Olsavsky said the company spent just over $30 billion in capital expenditures in the first half of the year, driven by growing demand for AWS services, including demand for generative AI tools. Amazon expects to ramp up those investments in the second half of the year, he added.
On the e-commerce front, everything stores have faced increasing competition from companies like Timo and Shein, which specialize in low-cost goods that rely on a direct factory-sourced supply chain. Amazon is reportedly developing its own digital storefront to compete directly for fashion and lifestyle spending.
“We are seeing cautious consumers, looking for deals,” Olsavsky said.
“Amazon’s revenue growth was lower than expected due to weak consumer spending in the quarter that fell between two major sales events — the Great Spring Sale in March and Prime Day in July,” Sky Canaves, principal analyst at eMarketer, said in a statement.
“Amazon will have to tailor its offerings and promotions to capitalize on these trends, as with reported plans to launch a Teemo-style discount section in time for the holidays this year,” Canaves said.
Amazon’s report comes days after its cloud computing and AI rival Microsoft (MSFT) beat earnings and profit expectations but missed cloud revenue, sending shares lower. Before that disappointment, Google parent Alphabet (GOOG, GOOGL) reported lower-than-expected revenue from YouTube ads, which also sent investors scrambling.
On the other hand, Meta (META) won Wall Street’s approval, posting better-than-expected revenue and earnings results, even as executives warned they expect “significant” capital expenditures in 2025. Shares rose more than 4% on Thursday.
Apple (AAPL) reported earnings alongside Amazon after the market closed, beating analysts’ expectations on earnings and revenue despite a year-over-year decline in iPhone sales.
Hamza Shaaban is a Yahoo Finance reporter covering markets and economics. Follow Hamza on X @Hishaban.
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