Amazon’s shares fell 8% in early Friday trading. This was because the growth of the company’s cloud computing unit, AWS, failed to impress investors enough. This is noteworthy when compared to the strong earnings reports of AI-focused competitors Alphabet and Microsoft.
Although Amazon Web Services accounts for a small portion of the company’s total revenue, it plays a significant role in generating profit, typically accounting for 60%. However, AWS’s 17.5% revenue growth lagged behind Microsoft’s Azure’s 39% and Google Cloud’s 32% growth.
Furthermore, Amazon’s cloud unit’s profit margin also narrowed.Analyst Matt Britzman from Hargreaves Lansdown said, “While Microsoft and Alphabet are showing strong momentum in cloud growth, AWS has failed to deliver the expected breakthrough. This shows how much investor sentiment is tied to the AI narrative.”
Regarding AI spending, major technology companies are attracting significant investor attention with an estimated budget of $330 billion. Microsoft is reportedly on track to overtake its competitors.
Amazon stated that its retail business was largely unaffected by US tariffs and that there was no decrease in demand. However, CEO Andy Jassy expressed uncertainty regarding tariffs in China.
Amazon’s P/E ratio is currently 33.87, while Microsoft’s is 34.19 and Alphabet’s is 18.64.
