Amazon’s recent earnings report has sent ripples through the financial markets, with the company’s stock sinking 7% following the announcement. That report, released on Thursday, highlighted a combination of growth and troubling signs that still has investors on edge and for good reason. Similarly, Amazon’s online store sales skyrocketed by 11% year over year, and advertising sales spiked, up 23%. The company’s profit guidance for the next several quarters was below analysts’ expectations. This barrage of mixed signals has led to speculation about the direction that the tech giant will ultimately take.
During its most recent earnings call, Amazon pointed to a record jump in revenue from services to sellers as exceeding market expectations. The firm has come under increasing fire for its controversial cloud subsidiary, Amazon Web Services (AWS). AWS, despite being the overall market leader, almost universally delivered results that disappointed investors. NFT analysts noticed a new, pernicious narrative taking root on Wall Street. They cautioned AWS was getting behind the eight ball against its rivals in the rapidly changing generative AI landscape.
Amazon also delivered record revenues and earnings for the quarter, buoyed by the consistent growth of the retail side. The company’s advertising department showed huge power, with revenue up 23%. Nevertheless, CEO Andy Jassy acknowledged uncertainties surrounding future earnings, particularly in light of shifting trade policies and tariffs under President Trump.
During the earnings call, Jassy expressed his thoughts on the current state of artificial intelligence, stating, “It’s very early days in AI development and adoption.” He underscored the company’s more than $100 billion investments in the technology. As he cautioned, knowing where the final tariffs will end up—in particular, for China—is still a tough prediction to make.
Make no mistake, Amazon’s eye-popping capital expenditures—over $24 billion in the first quarter—got people’s attention. This much investment demonstrates the Detroit automaker’s new and long-term devotion to growing its footprint and infrastructure. As Bernstein analysts wrote in a note following the call, Amazon’s tone was “not good,” pointing to a very cautious outlook at a time of mixed signals.
Jassy defended AWS’s position in the competitive cloud market, noting, “I think the second player is about 65% of the size of AWS.” He sought to alleviate concerns being raised by the analyst community. Indeed, they seemed scared that AWS would lose market share to opponents in the generative AI competition race. Brian Nowak from Morgan Stanley highlighted this narrative, stating, “There is a Wall Street finance person narrative right now that AWS is falling behind in generative AI with concerns about share loss to peers.”
Despite these headwinds, Jassy adopted a sunny disposition when it came to demand for Amazon’s services. He stated, “We just haven’t seen diminished demand, and we haven’t seen any kind of broad scale [average selling price] increases.” The subscription angle The CEO further teased upcoming subscription opportunities as functionality increases across their platform.
As Amazon navigates these mixed results and external pressures, investors will be closely monitoring how the company adapts to changing market dynamics. The cloud of uncertainty hanging over tariffs and trade policy provides another layer of nuance to its strategic planning.