Amazon Stock Falls 8%. Why, Jassy To-Dos, Why To Skip $AMZN Shares
Why? Although Amazon's retail business performed well, investors expressed disappointment with the growth pace of Amazon Web Services – which grew more slowly than Microsoft Azure and Google Cloud. In a conference call, analysts expressed frustration with CEO Andy Jassy's explanations for AWS's relatively slow growth.
Amazon's fundamental problem is its failure to adapt to the competitive imperatives of the generative AI age, as I described in my book Brain Rush. This age has been propelled by two companies – OpenAI which supplied the fast-growing ChatGPT and Nvidia, the designer of AI chips for speeding the training and operation of AI chatbots.
Amazon seems to be applying the strategy it used to create the cloud services industry to one where it seems struggling to catch up. More specifically, unlike Microsoft and Google – which have access to proprietary integrated AI chatbots (ChatGPT and Gemini, respectively) – AWS's strategy of handing off to developers the task of choosing and integrating individual computing services requires more technical expertise – thereby slowing adoption.
To grow faster, Jassey ought to consider three possible strategies:
Since Jassy helped build AWS and has yet to demonstrate a compelling vision for competing with faster growing rivals, I am skeptical of whether Amazon will be able to leapfrog these rivals.
'Our conviction that AI will change every customer experience is starting to play out," Jassy said in an earnings release. '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,' he added.
I have requested comment from Amazon and will update this post if I receive a response.
Amazon's Mixed Second Quarter Results
Amazon's second quarter results combined above expectations sales and earnings with a mixed forecast for the future combined with a shaky explanation for why AWS is growing more slowly in the age of AI.
Here are the key numbers:
Second quarter 2025 sales: $167.7 billion – up 13% and $5.5 billion above the FactSet consensus, according to Investor's Business Daily.
Amazon and its hyperscaler rivals – such as Google and Meta – are increasing their capital expenditures. For example, Amazon is boosting capital expenditures 42% to $118 billion in 2025 – while Google estimates 2025 capex of $85 billion while Meta forecast $69 billion in 2025 capex, according to CNBC.
While formal return on investment information is not available for these hefty capital expenditures, investors are using growth rates as a proxy for ROI. Since AWS is growing at roughly half the rate of Microsoft Azure and Google Cloud, investors see a problem with AWS's strategy.
Jassy's responses to analyst questions about AWS' relatively slow growth. He said the faster-growing second ranked rival was '65%' the size of AWS, highlighted Microsoft's security woes – notably the hacking of SharePoint, and suggested it was 'early days' in AI, according to the Q2 earnings conference call transcript.
These comments did not offer a compelling explanation of why Amazon – with 30% market share to Microsoft's Azure's 20%, according to Synergy Group -- is growing about half the rate of challengers.
Why AWS Is Growing More Slowly Than Rival Cloud Services
Since Jassy sidestepped the question, AWS is growing more slowly than rivals for two reasons:
What Amazon Must Do To Surpass Cloud Services Rivals
Here are three strategies Amazon must pursue to grow faster than its cloud services rivals:
These recommendations may be difficult to implement and may not result in new services that deliver more value to customers than those from faster-growing rivals.
For example, Amazon believes in inventing and improving its own solutions – as it did with AWS and Alexa. Therefore the recommended partnerships may be at odds with the company's culture.
Moreover, as former CEO of AWS Jassy may have strategic blind spots. These could include viewing AI as primarily an infrastructure challenge that Amazon can solve with superior engineering and a tendency to see the more rapid growth of rivals as superficial – rather than a sign customers value AI cloud services from Microsoft and Google more highly.
What Analysts Are Saying About Amazon's Stock
Is Amazon stock – which has lost 2.4% of its value so far in 2025 – trading at a bargain price? Some analysts sound skeptical:
The mixed views suggest some upside in Amazon stock. Of the 52 analysts who cover Amazon, the stock has 9.2% upside based on an average price target of $255.72, according to Zacks.
Unless AWS' revenue growth accelerates, that modest gain could prove difficult to achieve.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
26 minutes ago
- Yahoo
3 Side Gigs That Could Struggle in a High-Tariff Economy
The world is bracing for a changing economy as many of President Trump's new tariffs go into effect. Not only will these added costs on imports hurt Americans' wallets, they could make earning money in the gig economy harder, too. Consider This: Read Next: Trump announced on Wednesday, July 16 that he would send a letter implementing tariffs on goods from 150 smaller countries. Tariffs with larger trade partners, including Mexico, the European Union and Canada would also go into effect on August 1. Tariffs already in effect include a 25% tariff on vehicle import and auto parts, a 30% tariff on many Chinese imports, and up to 50% on steel and aluminum, according to NewsNation. These tariffs will affect prices on consumer goods, which, in turn, could hurt small businesses and gig workers. GOBankingRates spoke with Keith Spencer, career expert at Resume Now, to find out which gig workers could be hit hardest by tariffs in 2025. Rideshare and Delivery Drivers Drivers for companies like Uber and Lyft could feel the sting of tariffs on oil imports, motor vehicles and car parts, which would increase their business costs. 'Fuel, tires and parts, many of which are imported, become more expensive,' Spencer said. At the same time, demand might decrease. Faced with rising costs, people might forgo little luxuries like ordering DoorDash or having their groceries delivered via InstaCart. 'In a high-tariff economy, side gigs that rely heavily on consumer convenience tend to struggle first,' Spencer said. 'When prices rise, people naturally start cutting back on discretionary spending. That often impacts gig workers who depend on steady, high-volume demand.' Learn More: Task-Based Gigs and Home Help People who have been making money doing random tasks around the home through services like TaskRabbit may struggle to find customers. People who assemble furniture, mount TVs or perform small contracting and handyman tasks around the home will likely feel the impact of tariffs. People may choose to complete these tasks on their own rather than hiring someone. Plus, Spencer said, 'If the price of imported goods like furniture or electronics increases, people may delay or avoid those purchases. That naturally reduces demand for anyone offering services to set them up. Even when demand is steady, the cost of tools and materials often rises, which means gig workers are spending more out of pocket just to do their jobs.' Online Resellers If you've been earning money through eBay, Facebook Marketplace or affiliate sales, you may want to brace yourself for reduced sales and shrinking profit margins. 'If your side hustle involves sourcing products from overseas, such as electronics, clothing or beauty items, you may see your margins shrink,' Spencer said. 'Tariffs raise the base cost of goods, and consumers may push back on higher prices. That combination makes it harder for solo sellers to compete or stay profitable.' What To Do Instead While some gig workers may struggle, it doesn't mean the gig economy is dead. 'Not all side gigs are equally vulnerable,' Spencer said. Pointing to recent data from Resume Now, he noted that administrative support roles saw a 10% pay increase in the first quarter of 2025. Remote healthcare support has seen 70% year-over-year growth, based on further Resume Now data. 'Workers who want to future-proof their income in a high-tariff or high-cost economy might consider transitioning into roles that are both essential and automation-resistant,' Spencer advised. 'The side gigs most likely to succeed in a high-tariff economy are those that meet essential needs, help others cut costs, or can be performed remotely.' More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 7 Luxury SUVs That Will Become Affordable in 2025 6 Hybrid Vehicles To Stay Away From in Retirement This article originally appeared on 3 Side Gigs That Could Struggle in a High-Tariff Economy Sign in to access your portfolio
Yahoo
26 minutes ago
- Yahoo
Nektar Therapeutics (NASDAQ:NKTR) is a favorite amongst institutional investors who own 53%
Key Insights Significantly high institutional ownership implies Nektar Therapeutics' stock price is sensitive to their trading actions A total of 17 investors have a majority stake in the company with 50% ownership Insiders have been selling lately We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Every investor in Nektar Therapeutics (NASDAQ:NKTR) should be aware of the most powerful shareholder groups. With 53% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn). Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait. Let's delve deeper into each type of owner of Nektar Therapeutics, beginning with the chart below. Check out our latest analysis for Nektar Therapeutics What Does The Institutional Ownership Tell Us About Nektar Therapeutics? Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices. Nektar Therapeutics already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Nektar Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story. Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 13% of Nektar Therapeutics shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Charles Schwab Investment Management, Inc. is the largest shareholder with 8.3% of shares outstanding. BVF Partners L.P. is the second largest shareholder owning 7.4% of common stock, and Millennium Management LLC holds about 5.4% of the company stock. A closer look at our ownership figures suggests that the top 17 shareholders have a combined ownership of 50% implying that no single shareholder has a majority. While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future. Insider Ownership Of Nektar Therapeutics The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it. I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions. Our data suggests that insiders own under 1% of Nektar Therapeutics in their own names. It has a market capitalization of just US$397m, and the board has only US$4.0m worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling. General Public Ownership With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Nektar Therapeutics. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies. Next Steps: While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Nektar Therapeutics has 4 warning signs (and 3 which can't be ignored) we think you should know about. But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future. NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
26 minutes ago
- Yahoo
Results: Exponent, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts
Last week, you might have seen that Exponent, Inc. (NASDAQ:EXPO) released its quarterly result to the market. The early response was not positive, with shares down 5.4% to US$68.33 in the past week. Exponent reported US$133m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.52 beat expectations, being 5.6% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. After the latest results, the three analysts covering Exponent are now predicting revenues of US$530.2m in 2025. If met, this would reflect a modest 2.1% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to decrease 2.3% to US$1.98 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$529.8m and earnings per share (EPS) of US$1.97 in 2025. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates. View our latest analysis for Exponent There were no changes to revenue or earnings estimates or the price target of US$88.00, suggesting that the company has met expectations in its recent result. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Exponent analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$76.00. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth. One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Exponent's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 4.3% growth on an annualised basis. This is compared to a historical growth rate of 6.8% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.8% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Exponent. The Bottom Line The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$88.00, with the latest estimates not enough to have an impact on their price targets. With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Exponent analysts - going out to 2027, and you can see them free on our platform here. Even so, be aware that Exponent is showing 1 warning sign in our investment analysis , you should know about... Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
