
Amazon slumps after cloud computing growth underwhelms investors
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.
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."
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The Independent
28 minutes ago
- The Independent
Food earmarked for millions of people still languishes in warehouses after Trump shuttered USAID
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The Guardian
28 minutes ago
- The Guardian
Australia shouldn't fear the AI revolution – new skills can create more and better jobs
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Daily Mail
28 minutes ago
- Daily Mail
The Hamptons' 'poor neighbor' becomes a real estate hotbed of multimillion-dollar bidding wars
The Hamptons are out and East Coasters are moving to its cooler, quieter, slightly 'poorer neighbor' - the North Fork. What was once slow paced farm towns has become the new go-to for those who wish to make a home for themselves on Long Island, even if just for the summer. Realtor Donald Brennan has been a homeowner and resident on the North Fork for 22 years and recently his real estate firm opened up an office there. He told Daily Mail he's seen major changes in the area and that's in part due to how crowded the Hamptons on the South Fork has gotten. Families, friends, and retirees from New York City have been traveling down to the Hamptons - just two to three hours away - for generations. Naturally, as it became more and more popular over time, he said the traffic between New York City and the coastal getaway has become non-stop and the once quiet enclave is now polluted with traffic, parties, and back to back beach houses, leaving little room for new development. 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This 4 bed 2 bath home is listed with Engel & Volkers for $1.3 million And the numbers don't lie. According to Engel & Volkers, sales are up significantly on the North Fork, even in just the last year. Single-family home sales are up 17 percent in comparison to 2024. On top of that, the average sales price has skyrocketed to $1.168 million, an 8 percent increase since 2024. And according to recent reports, those homes aren't staying on the market for long. Todd Bourgard, the CEO of Douglas Elliman's Long Island, the Hamptons, and North Fork locations, said that his agents are quickly adapting to these quick sales and bidding wars. 'North Fork is now, and always has been, a beautiful place to live,' Bourgard told The New York Post. 'People are discovering it more and more every single day. We're certainly seeing the prices going up, because, like everywhere else, it lacks inventory.' Brennan said there really is no average homebuyer on the North Fork. People seem to be coming in masses regardless of age. Most are looking for single family homes with four or more bedrooms, swimming pools, and close proximity to the bay. According to Brennan the biggest issue with the rush of new residents is their desire to change the cohesive landscape of North Fork towns like Mattituck or Southold with populations of 4,200 and 6,600 respectively. Because there are so many land-buying opportunities and less-expensive homes that have been around for decades, affluent families are using their means to construct new, modern buildings. The popularity of the South Fork has caused new builds to be difficult and beach front space to be limited. This home on the North Fork is listed with Engel & Volkers for $1.4 million Brennan said good restaurants and shops have opened in the area over the last decade close to the beautiful beaches. Stairs lead to a beautiful beach on the North Fork of Long Island Orient Point Lighthouse is seen above. Orient is the eastern-most town on Long Island's picturesque North Fork He noted in some instances you can tell who's new to the area just by their architecture style. 'It's a little bit easier to see affluence,' he said. 'Those who've been there for a long time, and live in these more humble homes that are, you know, bungalows, or cottages are now maybe sitting side by side with 7,000 square foot modern glass boxes.' 'I think it's jarring for some people,' he said. But he certainly sees the appeal. 'There's really almost no traffic to speak of through the summer months. Some very good restaurants that have appeared over the last decade or so,' he said. 'So it's a little more relaxed, quieter existence than what most people may be experiencing today on the South Fork.'