Amazon Posts Solid Earnings. A Cloud Miss and Weak Outlook Are Hurting the Stock

Amazon.com topped Wall Street estimates for quarterly revenue on Thursday, as strong sales over the holiday shopping season boosted its retail business, helping offset weakness in the cloud computing unit. However, shares of the company fell 2% in extended trading as investors reacted to the cloud miss and a weak outlook for the current quarter.

Amazon's cloud unit, Amazon Web Services (AWS), reported a 19% rise in revenue to $28.79 billion, falling short of estimates of $28.87 billion, according to data compiled by LSEG. The company joins smaller cloud providers Microsoft and Google in reporting weak cloud numbers, as investors have grown increasingly impatient with Big Tech's multibillion-dollar capital spending and are hungry for returns from the hefty AI investments.

AWS recorded $10.45 billion in operating income, representing 60% of its parent's profit. Analysts expected $9.15 billion. The unit's operating margin came in at 38%, the widest for AWS since at least 2014. Google Cloud reported an operating margin of 17%.

Amazon's retail business helped offset the cloud weakness, with the company reporting online sales growth of 7% in the quarter to $75.56 billion. That compared with estimates of $74.55 billion. The company reported revenue of $187.8 billion in the fourth quarter, compared with the average analyst estimate of $187.30 billion, according to data compiled by LSEG.



Amazon's cloud miss comes at a time when investors have grown increasingly impatient with Big Tech's multibillion-dollar capital spending and are hungry for returns from the hefty AI investments. The company's CEO, Andy Jassy, acknowledged the slowdown in cloud spending, stating that "companies are spending more cautiously in this macro environment."

The company's strong earnings in other segments, such as retail and advertising, helped offset the cloud miss. However, the balance between these segments is expected to shift in the coming quarters, with the cloud segment potentially facing increased competition and slower growth. Investors should monitor AWS's growth closely to assess the potential long-term implications for Amazon's stock price.



In conclusion, Amazon's strong earnings in other segments helped offset the cloud miss in the fourth quarter of 2024. However, the balance between these segments is expected to shift in the coming quarters, with the cloud segment potentially facing increased competition and slower growth. Investors should monitor AWS's growth closely to assess the potential long-term implications for Amazon's stock price.