Amazon Stock Plunges 7.71% on AI Spending, Cloud Competition

On August 1, 2025, Amazon.com's stock experienced a significant drop of 7.71% in pre-market trading.

Amazon's second-quarter financial report revealed a mixed performance. While the company exceeded market expectations for earnings and revenue, its stock price fell by over 6% in after-hours trading. This decline was primarily due to conservative guidance for the upcoming quarter's operating income, which was projected to be between $15.5 billion and $20 billion, significantly lower than analysts' expectations of $194.8 billion.

Investors expressed concern over Amazon's substantial investments in artificial intelligence, totaling $1000 billion for the year. The company's capital expenditure for the second quarter reached a record $314 billion, reflecting its aggressive investment strategy in AI and cloud infrastructure. This investment is aimed at enhancing customer experience, innovation speed, operational efficiency, and business growth.

Despite these investments, Amazon's cloud computing unit, AWS, faced stiff competition from Microsoft and Google. AWS's revenue growth of 18% lagged behind Microsoft Azure's 39% and Google Cloud's 32% growth rates. This competitive pressure, along with the high costs associated with AI investments, contributed to the stock's decline.

In response to these challenges, Amazon's CEO, Andy Jassy, emphasized the company's leadership in the cloud services market and its commitment to AI innovation. He highlighted that AWS remains the preferred choice for many companies due to its security and reliability. Jassy also noted that the company's AI advancements are expected to drive future growth and profitability.

In the retail sector, Amazon's online store sales grew by 11% to $615 billion, surpassing analyst expectations. The company's advertising business also showed strong performance, with revenue increasing by 23% to $156.9 billion, driven by the growing demand for digital advertising.

Looking ahead, Amazon's guidance for the third quarter includes a revenue forecast of $1740 billion to $1795 billion, indicating a year-over-year growth of 10% to 13%. However, the company cautioned that economic uncertainties and trade policies could impact its performance.