Amazon Stock Drops 7% as AWS Growth Disappoints

Amazon's stock price experienced a significant decline of over 7% on Friday, resulting in a loss of $178 billion in market capitalization and closing at $217.66. The company reported a 13% year-over-year increase in total revenue for the second quarter, reaching $167.7 billion, which exceeded market expectations of $162.1 billion. Earnings per share were $1.68, surpassing the average market forecast of $1.33. However, the growth in Amazon Web Services (AWS), the company's cloud computing division, was underwhelming. AWS revenue grew by only 17.5% year-over-year, reaching $30.9 billion, slightly above the analyst average expectation of $30.8 billion.

Looking ahead, Amazon's guidance for the third quarter, ending in September, indicated an operating profit of $15.5 billion to $20.5 billion, falling short of the average analyst estimate of $19.4 billion. The projected sales for the same period were $174 billion to $179.5 billion, exceeding the average analyst estimate of $173.2 billion. The company's conservative outlook for the current quarter, with expectations for revenue growth of only 11-15%, has raised concerns among investors about Amazon's ability to maintain its leadership position in the cloud services market.

Analysts have expressed disappointment with AWS's revenue growth, particularly in comparison to competitors. Microsoft's Azure reported a 39% increase in revenue, while Google Cloud saw a 32% growth during the same period. This disparity has led to questions about whether Amazon's substantial investments in artificial intelligence are yielding the desired results. The underwhelming performance of AWS, which has been a key driver of Amazon's growth, has further dampened investor sentiment and raised concerns about the company's competitive edge in the cloud services market.