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.
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