Amazon cloud computing results fail to impress, shares slide after hours
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.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Telegraph
24 minutes ago
- Telegraph
Tesla ordered to pay $243m over Autopilot deaths
Tesla has been ordered to pay $243m (£183m) in compensation after a jury ruled that its Autopilot technology was partly to blame for a fatal crash involving one of its cars. A Miami jury on Friday held that Elon Musk's company bore significant responsibility for the death of a young woman and serious injuries to her boyfriend because its technology had failed. They assigned blame even though a reckless driver of a Tesla Model S admitted he was distracted after dropping his mobile phone. He rammed into the couple, Naibel Benavides Leon and Dillon Angulo, who were standing next to their parked Chevrolet. 22-year-old Ms Benavides Leon died following the crash. Tesla has now been ordered to pay $43m in compensatory damages and $200m in punitive damages to Mr Angulo and the family of Ms Benavides Leon. The verdict is the latest setback for Mr Musk, who is under mounting pressure as a result of falling sales and share price at Tesla. The billionaire's ill-fated alliance with Donald Trump has done significant damage to the electric car company's brand image and critics say Mr Musk has lost his focus. Autopilot is a driver-assistance system that Tesla says is intended to reduce a driver's 'overall workload'. However, it has faced repeated investigations in the US over its safety record and has not been cleared for use on British roads. Dan O'Dowd, a road safety campaigner who has long questioned Tesla's technology, said: 'Today's ruling is a heavy blow to Elon Musk and Tesla.' The Miami decision ends a four-year long case that was remarkable not just in its outcome but in the fact it even made it to trial. Many similar cases against Tesla have been dismissed or settled by the company to avoid the spotlight of a trial. The trial itself was contentious. Lawyers acting for the victims claimed Tesla either hid or lost key evidence, including data and video recorded seconds before the accident. The plaintiffs hired a forensic data expert who dug it up key evidence. Presented with the findings, Tesla said it made a mistake and claimed the failure to present the evidence was an honest mistake. A Tesla spokesman said: 'Today's verdict is wrong and only works to set back automotive safety and jeopardize Tesla's and the entire industry's efforts to develop and implement life-saving technology. 'We plan to appeal given the substantial errors of law and irregularities at trial.'
Reuters
24 minutes ago
- Reuters
VIEW Investors react to Kugler's resignation, firing of BLS commissioner
Aug 1 (Reuters) - The Federal Reserve said on Friday that Governor Adriana Kugler was resigning from the central bank effective Aug. 8. Separately, U.S President Donald Trump ordered that the commissioner of the U.S. Bureau of Labor Statistics, Erika L. McEntarfer, be fired after data showed employment growth was than expected last month. COMMENTS: "Obviously, (Adriana's resignation) is a negative, and that'll probably continue to pressure the dollar. That's not a good sign, when someone resigns, unless there is a personal reason, there is always a question mark as to why. So the unknown factor of that usually adds to uncertainties. "Of course, you had a major revision in the employment numbers so it's a fact that Trump fired the Commissioner of Labour Statistics, basically questioning the accuracy of these numbers because of that huge revision that we had. So, anytime something like this happens, it always raises uncertainties." CHRISTOPHER HODGE, CHIEF US ECONOMIST, NATIXIS ,NEW YORK: 'The interim BLS Chief looks to be an accomplished technocrat, which is a great sign. Going forward, should the fidelity of the data be compromised, this would place the markets and Fed in a very precarious position. I would expect the Fed to rely more and more on the anecdotes it collects from the Beige Book. Her (Adriana Kugler's ) term was set to expire in January, so no great change in policy. I have not seen an indication that she is resigning in protest, but the timing is very curious' JODY CALEMINE, DIRECTOR OF ADVOCACY, AFL-CIO, WASHINGTON, D.C. 'Today was probably the last reliable jobs report we will ever see. This isn't good for anybody looking to see what's going on with the economy, not just for workers but for the business community in general.' 'This morning's jobs report was showing what was the first indicators of probably a coming recession…it's clear he fired her (McEntarfer) for issuing a jobs report he just didn't like.' On Kugler: 'The Fed board should be independent of the president, that's for sure. He (Trump) is wielding increasingly authoritarian control over different agencies, and clearly he wants to wield that control over the Fed. The markets have kept that impulse in check so far. He's increasingly out of control.' JUAN PEREZ, SENIOR DIRECTOR OF TRADING, MONEX USA, WASHINGTON: "The way (the market) is going to interpret (the departures) is in a very dollar-negative way." "No matter what the economic picture in the United States, the one thing that holds the U.S. dollar strong in the eyes of the world is the authority and the independence of the Federal Reserve. Whenever anything comes to potentially put that into compromise then that's when the U.S. dollar spirals down." "There will be an opening for the Trump administration to fill. It's likely he will choose somebody whose views on interest rates match his own. Then Treasury Secretary Bessent wants to have a list of possible replacements for the Fed Chair by the end of the year so, Trump is getting a bigger chance to appoint people whose views match his own." Regarding Trump's order to fire Erika L. McEntarfe, he said: "I don't like to see a bureaucrat fired just because the data that gets presented doesn't support the administration's policies. We have a president who believes the economy is strong and that interest rates should be cut . I have read nothing that suggests she was not doing a good job or conscientious. It's upsetting. We're killing the messenger here instead of trying to see what the data really says and go from there. I see no evidence that the numbers were ever manipulated. It wouldn't be big news today if it happened a lot. Certainly, it's unusual."
Reuters
an hour ago
- Reuters
Tesla ordered by Florida jury to pay $329 million in fatal Autopilot crash
Aug 1 (Reuters) - A Florida jury on Friday found Tesla (TSLA.O), opens new tab liable in the 2019 fatal crash of an Autopilot-equipped Model S and ordered Elon Musk's automaker to pay $329 million to the family of a deceased woman and an injured survivor. Jurors in Miami federal court ordered Tesla to pay $129 million in compensatory damages and $200 million in punitive damages to the estate of Naibel Benavides Leon and to her former boyfriend Dillon Angulo. Lawyers for the plaintiffs said the trial was the first involving the wrongful death of a third party resulting from Autopilot. The plaintiffs had sought $345 million. Tesla has faced many similar lawsuits over its vehicles' self-driving capabilities, but they have been resolved or dismissed without getting to trial. A judge rejected Tesla's efforts to dismiss the case earlier in the summer, and experts said this may encourage other litigants against the EV maker. 'I think it's a big deal," said Alex Lemann, a professor at Marquette University Law School, who said this may make future settlements more expensive for Tesla. "This is the first time that Tesla has been hit with a judgment in one of the many, many fatalities that have happened as a result of its auto-pilot technology." Friday's verdict could impede efforts by Musk, the world's richest person, to convince investors that Tesla can become a leader in so-called autonomous driving for private vehicles as well as robotaxis it plans to start producing next year. Shares fell 1.8% on Friday. Tesla plans to appeal, according to published reports. The Austin, Texas-based company and its lawyers did not immediately respond to several requests for comment. The trial concerned an April 25, 2019 incident where George McGee drove his 2019 Model S at about 62 mph (100 kph) through an intersection into the victims' parked Chevrolet Tahoe as they were standing beside it on a shoulder. McGee had reached down to pick up a cellphone he dropped on his car's floorboard and allegedly received no alerts as he ran a stop sign and stop light before hitting the victims' SUV. "We have a driver who was acting less than perfectly, and yet the jury still found Tesla contributed to the crash," said Philip Koopman, a Carnegie Mellon University engineering professor and expert in autonomous technology. "The only way the jury could have possibly ruled against Tesla was by finding a defect with the Autopilot software. That's a big deal." Benavides Leon was allegedly thrown 75 feet to her death, while Angulo suffered serious injuries. "Tesla designed Autopilot only for controlled-access highways yet deliberately chose not to restrict drivers from using it elsewhere, alongside Elon Musk telling the world Autopilot drove better than humans," Brett Schreiber, a lawyer for the plaintiffs, said in a statement. "Today's verdict represents justice for Naibel's tragic death and Dillon's lifelong injuries," he added. Last month, Tesla posted its biggest quarterly sales decline in more than a decade, and profit fell short of Wall Street forecasts.
