Amazon.com investors drove shares down sharply on Thursday (Feb 6) due to weakness in the retailer’s cloud computing unit and lower-than-expected forecasts for first-quarter revenue and profit.
Amazon’s shares fell as much as 5 per cent in extended trade after the fourth-quarter earnings report, erasing about US$90 billion worth of stock market value, and were last down about 4.2 per cent.
Amazon Chief Financial Officer Brian Olsavsky said he expected the capital expenditure run rate for this year to be roughly the same as last year’s fourth quarter when the company spent US$26.3 billion. Amazon has boosted spending in particular to help develop artificial intelligence software.
The company’s sales estimate for the first quarter failed to meet analysts’ expectations, even if a negative impact of US$2 billion from last year’s Leap Day is included. The company said it anticipates between US$151 billion and US$155 billion, compared with the average estimate of US$158 billion.
The cloud unit, Amazon Web Services, reported a 19 per cent rise in revenue to US$28.79 billion, falling short of estimates of US$28.87 billion, according to data compiled by LSEG. Amazon joins smaller cloud providers Microsoft and Google in reporting weak cloud numbers.
Chief Executive Officer Andy Jassy said the inconsistent flow of computer chips had held back some growth in AWS. “We could be growing faster, if not for some of the constraints on capacity, and they come in the form of chips from our third-party partners coming a little bit slower than before,” he told investors on a conference call.
The cloud weakness occurs as investors have grown increasingly impatient with Big Tech’s multibillion-dollar capital spending and are hungry for returns from hefty investments in AI.
“After very strong third-quarter numbers, this quarter the growth rates all missed. That’s what the market doesn’t want to hear,” said Daniel Morgan, senior portfolio manager at Synovus Trust. He said this is particularly true after the emergence of new competitors in artificial intelligence such as China’s DeepSeek.
