Amazon’s recent financial report for the first quarter has raised eyebrows, as the tech giant fell short of anticipated growth in its cloud segment, causing a stir among investors. Following the announcement, the company’s stock dipped nearly 5% in after-hours trading. With Amazon Web Services (AWS) reporting a quarterly revenue increase of 16.9%—reaching $29.27 billion—the growth lagged behind expectations of 17.4% and a projected $30.9 billion in sales.
AWS Shows Signs of Weakness
In stark contrast, Microsoft recently posted strong results for its Azure cloud service, suggesting a shift in the competitive landscape. AWS’s growth rate marked its slowest in five quarters, prompting industry experts to speculate. "For a while, AWS and Google Cloud have dominated the market, but Microsoft’s impressive figures might indicate a change," noted Dave Wagner, a portfolio manager at Aptus Capital Advisors. He expressed that investor expectations for Amazon were elevated, particularly after Microsoft’s robust performance.
Forecasts Fall Short
Looking ahead, Amazon projected its operating income for the ongoing quarter to fall between $13 billion and $17.5 billion, which is below the average estimate of $17.7 billion, according to data from LSEG. However, the company’s forecast for second-quarter sales exceeded expectations, providing a glimmer of hope for investors navigating the uncertainty related to U.S. tariffs.
For the first quarter ending March 31, Amazon reported a total revenue of $155.7 billion, slightly above analysts’ estimates of $155.04 billion. The company anticipates net sales for the upcoming quarter to range between $159 billion and $164 billion, compared to the average estimate of $160.91 billion.
Impact of U.S. Tariffs
The uncertainty brought on by high tariffs imposed by former President Donald Trump on Chinese imports continues to affect retailers like Amazon. Some sellers are reportedly planning to forgo participation in the much-anticipated Prime Day sales event this July, as reported by Reuters.
In a positive light, Amazon also witnessed a 19% increase in online advertising revenue, totaling $13.92 billion, which surpassed analyst expectations. The company is solidifying its position in the advertising market, now ranking just behind Meta and Alphabet.
Investors and market watchers will be keenly observing how Amazon navigates these challenges while aiming to regain momentum in its cloud services division.
