Amazon cloud computing results fail to impress, shares drop after hour
Shares fell by more than 2% in after-market 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 earlier this month.
AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, compared with 39.5% in this year's first quarter and 35.5% a year ago.
AWS, the cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion.
The company 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.
Blockbuster cloud revenue growth at Microsoft (MSFT.O), opens new tab and Alphabet's (GOOGL.O), opens new tab Google raised expectations for AWS, the world's largest cloud provider.
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 into AI infrastructure, analysts have said the lack of a strong AI model from AWS is causing some concerns that the company could be trailing rivals in AI development, analysts said.
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.
Investors have been closely 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.
Analysts had said Amazon's focus on low prices, quick delivery and the sheer number of product categories has 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.
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