Amazon cloud computing results fail to impress, shares dive
Shares plunged by more than 7% after-hours. Before releasing the results, Amazon had finished 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 is their growth engine and to see that drop in margin is dropping the stock," said Ken Mahoney, CEO of Mahoney Asset Management. "The market was looking for further fireworks to take this up back to new highs and beyond."
AWS 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%.
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 largest tech companies have been boosting capital expenditures to add more data center capacity, particularly for artificial intelligence software deployment and development. Amazon said it expected roughly second-half spending roughly the same as its second quarter total of $31.4 billion, suggesting it would spend around $118 billion for the full year. Analysts had projected about $100 billion.
On Wednesday, Microsoft said it would spend a record $30 billion in the current quarter. Google-parent Alphabet raised its spending forecast by $10 billion to $85 billion for the year.
Seattle-based Amazon 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.
CEO Andy Jassy, in a call with analysts, addressed concerns about the impacts of tariffs on Amazon's core retail business.
"Through the first half of the year, we haven't yet seen diminishing demand nor prices meaningfully appreciating," he said on a call with analysts. "We also have such diversity of sellers in our marketplace, over 2 million sellers in total, with differing strategies of whether to pass on higher costs to consumers."
He added: "We just don't know what's going to happen moving forward. It's hard to know where the tariffs are going to settle, particularly in China."
President Donald Trump's tariffs have major retailers and consumer goods companies scrambling to protect margins while trying not to hurt consumer demand.
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 its many 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.
Amazon has been trimming jobs, including at its AWS, books, devices and podcasting units. Headcount fell by 14,000 workers from this year's first quarter, bringing the total to 1.46 million, the first decline since the beginning of 2024.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Auto Blog
5 minutes ago
- Auto Blog
VW's Coupe-Styled EV Could Be Dead in Two Years
By signing up I agree to the Terms of Use and acknowledge that I have read the Privacy Policy . You may unsubscribe from email communication at anytime. The 2026 Dodge Durango brings back the Hemi V8 across all trims, adds a 710-hp Hellcat Jailbreak with 6M+ combos, and starts under $43K for AWD V8 power. If you're thinking about leasing the top dog 4Runner, you'll want to check out the numbers first. Ford Motor Co. has again delayed replacements for two key battery-electric models, the F-150 Lightning pickup and E-Transit commercial van as it shifts focus to more affordable EVs. It may also change plans for what was to be its $5.6 billion Blue Oval City EV plant near Memphis. The first half of 2025 has been kind to Volkswagen's EVs, with the automaker seeing an increase of around 47 percent in sales. Despite that, the automaker is reportedly considering cutting one of its longer-running electric models due to unimpressive sales numbers. VW is reportedly looking to cut the ID.5 as soon as 2027, which would mark the seven-year point in its lifespan. The coupe-styled electric SUV never made it to the U.S., and in Europe, buyers have favored the larger, more practical ID.4. Volkswagen is not considering a follow-up for the ID.5. 0:04 / 0:09 VW will introduce a sub-$20,000 EV, but probably not here Watch More The ID.5 also forms the basis for the Ford Capri, which went on sale last year and immediately had its production numbers cut back due to 'rapidly deteriorating market conditions for electric vehicles,' according to a Ford spokesperson. Volkswagen combines ID.4 and ID.5 sales, so it can be difficult to get solid sales numbers. That said, the two combined to become VW's best-selling EVs in the first half of 2025, followed by the ID.3. Audi's Q4 e-tron variants landed in a distant third place. Volkswagen is targeting and discontinuing slower-selling models, starting with the Passat a few years back and the Arteon more recently. The newer ID. Buzz electric minivan was slated to replace the Touran in other countries, but those plans were ditched due to lackluster demand. Like others in the industry, the German automaker has been forced to adapt as buyers' on-again, off-again EV demand makes it difficult to plan. Volkswagen also has headaches in China, where buyers are shifting toward domestic brands in high numbers. The company has seen strikes and other challenges in its European workforce as it looks to cut costs, with the auto workers' union saying the company 'set fire to our collective agreements.' About the Author Chris Teague View Profile
The Guardian
5 minutes ago
- The Guardian
‘It's missing something': AGI, superintelligence and a race for the future
A significant step forward but not a leap over the finish line. That was how Sam Altman, chief executive of OpenAI, described the latest upgrade to ChatGPT this week. The race Altman was referring to was artificial general intelligence (AGI), a theoretical state of AI where, by OpenAI's definition, a highly autonomous system is able to do a human's job. Describing the new GPT-5 model, which will power ChatGPT, as a 'significant step on the path to AGI', he nonetheless added a hefty caveat. '[It is] missing something quite important, many things quite important,' said Altman, such as the model's inability to 'continuously learn' even after its launch. In other words, these systems are impressive but they have yet to crack the autonomy that would allow them to do a full-time job. OpenAI's competitors, also flush with billions of dollars to lavish on the same goal, are straining for the tape too. Last month, Mark Zuckerberg, chief executive of Facebook parent Meta, said development of superintelligence – another theoretical state of AI where a system far exceeds human cognitive abilities – is 'now in sight'. Google's AI unit on Tuesday outlined its next step to AGI by announcing an unreleased model that trains AIs to interact with a convincing simulation of the real world, while Anthropic, another company making significant advances, announced an upgrade to its Claude Opus 4 model. So where does this leave the race to AGI and superintelligence? Benedict Evans, a tech analyst, says the race towards a theoretical state of AI is taking place against a backdrop of scientific uncertainty – despite the intellectual and financial investment in the quest. Describing AGI as a 'thought experiment as much as it is a technology', he says: 'We don't really have a theoretical model of why generative AI models work so well and what would have to happen for them to get to this state of AGI.' He adds: 'It's like saying 'we're building the Apollo programme but we don't actually know how gravity works or how far away the moon is, or how a rocket works, but if we keep on making the rocket bigger maybe we'll get there'. 'To use the term of the moment, it's very vibes-based. All of these AI scientists are really just telling us what their personal vibes are on whether we'll reach this theoretical state – but they don't know. And that's what sensible experts say too.' However, Aaron Rosenberg, a partner at venture capital firm Radical Ventures – whose investments include leading AI firm Cohere – and former head of strategy and operations at Google's AI unit DeepMind, says a more limited definition of AGI could be achieved around the end of the decade. 'If you define AGI more narrowly as at least 80th percentile human-level performance in 80% of economically relevant digital tasks, then I think that's within reach in the next five years,' he says. Matt Murphy, a partner at VC firm Menlo Ventures, says the definition of AGI is a 'moving target'. He adds: 'I'd say the race will continue to play out for years to come and that definition will keep evolving and the bar being raised.' Even without AGI, the generative AI systems in circulation are making money. The New York Times reported this month that OpenAI's annual recurring revenue has reached $13bn (£10bn), up from $10bn earlier in the summer, and could pass $20bn by the year end. Meanwhile, OpenAI is reportedly in talks about a sale of shares held by current and former employees that would value it at about $500bn, exceeding the price tag for Elon Musk's SpaceX. Some experts view statements about superintelligent systems as creating unrealistic expectations, while distracting from more immediate concerns such as making sure that systems being deployed now are reliable, transparent and free of bias. 'The rush to claim 'superintelligence' among the major tech companies reflects more about competitive positioning than actual technical breakthroughs,' says David Bader, director of the institute for data science at the New Jersey Institute of Technology. Sign up to TechScape A weekly dive in to how technology is shaping our lives after newsletter promotion 'We need to distinguish between genuine advances and marketing narratives designed to attract talent and investment. From a technical standpoint, we're seeing impressive improvements in specific capabilities – better reasoning, more sophisticated planning, enhanced multimodal understanding. 'But superintelligence, properly defined, would represent systems that exceed human performance across virtually all cognitive domains. We're nowhere near that threshold.' Nonetheless, the major US tech firms will keep trying to build systems that match or exceed human intelligence at most tasks. Google's parent Alphabet, Meta, Microsoft and Amazon alone will spend nearly $400bn this year on AI, according to the Wall Street Journal, comfortably more than EU members' defence spend. Rosenberg acknowledges he is a former Google DeepMind employee but says the company has big advantages in data, hardware, infrastructure and an array of products to hone the technology, from search to maps and YouTube. But advantages can be slim. 'On the frontier, as soon as an innovation emerges, everyone else is quick to adopt it. It's hard to gain a huge gap right now,' he says. It is also a global race, or rather a contest, that includes China. DeepSeek came from nowhere this year to announce the DeepSeek R1 model, boasting of 'powerful and intriguing reasoning behaviours' comparable with OpenAI's best work. Major companies looking to integrate AI into their operations have taken note. Saudi Aramco, the world's largest oil company, uses DeepSeek's AI technology in its main datacentre and said it was 'really making a big difference' to its IT systems and was making the company more efficient. According to Artificial Analysis, a company that ranks AI models, six of the top 20 on its leaderboard – which ranks models according to a range of metrics including intelligence, price and speed – are Chinese. The six models are developed by DeepSeek, Zhipu AI, Alibaba and MiniMax. On the leaderboard for video generation models, six of the top 10 – including the current leader, ByteDance's Seedance – are also Chinese. Microsoft's president, Brad Smith, whose company has barred use of DeepSeek, told a US senate hearing in May that getting your AI model adopted globally was a key factor in determining which country wins the AI race. 'The number one factor that will define whether the US or China wins this race is whose technology is most broadly adopted in the rest of the world,' he said, adding that the lesson from Huawei and 5G was that whoever establishes leadership in a market is 'difficult to supplant'. It means that, arguments over the feasibility of superintelligent systems aside, vast amounts of money and talent are being poured into this race in the world's two largest economies – and tech firms will keep running. 'If you look back five years ago to 2020 it was almost blasphemous to say AGI was on the horizon. It was crazy to say that. Now it seems increasingly consensus to say we are on that path,' says Rosenberg.
Auto Blog
6 minutes ago
- Auto Blog
The Military Wants to Find the Best Ways To Destroy a Tesla Cybertruck
By signing up I agree to the Terms of Use and acknowledge that I have read the Privacy Policy . You may unsubscribe from email communication at anytime. View post: Hyundai's Next EV Could Be Its Cheapest Yet — Everything We Know So Far The 2026 Dodge Durango brings back the Hemi V8 across all trims, adds a 710-hp Hellcat Jailbreak with 6M+ combos, and starts under $43K for AWD V8 power. Tesla CEO Elon Musk initially promised that the new Cybertruck would be bulletproof and apocalypse-ready, but he probably wasn't planning for them to be used as target practice for the military. The U.S. Air Force is reportedly looking for two Cybertrucks to use as targets for precision guided weapons. Another Chinese automaker is taking the fight to Tesla Watch More The USAF chose Cybertrucks because it said there's a possibility future adversaries could be driving one. The Tesla is one of 33 different vehicles being sought for use by the Air Force Testing Center at the White Sands Missile Range in New Mexico. That said, the Cybertruck is the only model listed by name, with others being generic sedans, trucks, and SUVs. The Air Force's order documents state that the Cybertruck's 'aggressively angular and futuristic design, paired with its unpainted stainless steel exoskeleton, sets it apart from competitors typically using painted steel or aluminum bodies. Additionally, its 48V electrical architecture provides superior power and efficiency, a feature that rivals are only beginning to develop. Extensive internet searches and industry outreach by [redacted] found no vehicles with features comparable to those of the Cybertruck.' While we don't know if the military has some intelligence suggesting that insurgents are snapping up Tesla Cybertrucks, it makes sense that it would want to figure out the best ways to destroy one in case that did happen. Plus, Tesla likely won't be unhappy to sell some Cybertrucks, even if it's only two, and even if they're only being purchased to be shot at. After hearing claims that the truck was indestructible, the internet went to work proving that it wasn't. Many YouTubers and other personalities tested the trucks with crossbows, rifles, and all manner of other firearms, and it stood up to most of the punishment surprisingly well. Of course, it's not actually indestructible, as some have shown that doing 'real' truck stuff causes problems in a hurry. About the Author Chris Teague View Profile
