Amazon experiences a dip following underwhelming expansion in cloud services, disheartening investors
Amazon Web Services (AWS) reported a 17.5% increase in revenue for the June quarter, a figure that pales in comparison to the 39% growth seen at Microsoft Azure and 32% growth at Google Cloud. Despite this, AWS continues to invest heavily in AI technology, focusing on agentic AI tools and infrastructure.
AWS's recent offerings include Amazon Bedrock AgentCore, Amazon CloudWatch generative AI observability, and new AI agent deployment capabilities designed for enterprise scale, security, and reliability. These tools aim to enable organizations to build, deploy, and operate AI agents securely and at scale, supporting complex use cases across industries like healthcare, finance, and agriculture.
However, AWS's AI developments are often more focused on cloud service enhancements, developer tooling, and enterprise adoption rather than consumer-facing applications. This has allowed Microsoft and Alphabet to dominate public perception and headlines in the AI race with their directly consumer-facing generative AI innovations and integrated AI tools.
Market sentiment and media coverage tend to showcase Microsoft’s and Alphabet’s AI ecosystems as further ahead or more innovative because they combine large language models with popular software suites and broader AI consumer experiences. For instance, Microsoft has integrated OpenAI-powered tools into Bing and Office, while Google has launched Bard and AI integrations across its ecosystem.
As a result, concerns about AWS falling behind stem less from a lack of AI capability and more from AWS’s focus on enterprise AI infrastructure rather than high-profile consumer AI products, contrasted against Microsoft’s and Alphabet’s aggressive public AI expansion and integrations.
Despite these challenges, Amazon's online store sales jumped a better-than-expected 11% in the second quarter. However, the stock fell 7% on Friday due to investor concerns about the company's cloud unit falling behind Microsoft and Alphabet in the artificial intelligence race.
Michael Morton, analyst at MoffettNathanson, stated that if Amazon's retail business was a standalone entity, it would be trading dramatically higher following the near-perfect results. Matt Britzman, senior equity analyst at Hargreaves Lansdown, stated that AWS did not meet expectations in the spotlight.
The stock's 12-month forward price-to-earnings ratio is 33.87, compared with Microsoft's 34.19 and Alphabet's 18.64. The drop in Amazon's stock could erase around $170 billion from its market value, if the losses hold.
CEO Andy Jassy stated that it was still "very early days" in the AI race and that Amazon's massive cloud business is primed to perform well once the AI capacity constraints start to ease. The companies are spending billions of dollars on datacenters and cutting-edge chips to overcome supply constraints and capitalize on soaring demand for AI services.
Amazon's retail business has remained resilient in the face of Trump administration tariffs. Manufacturers and suppliers have shouldered most of the tariff impact so far. Despite the challenges in the AI race, Amazon continues to be a significant player in the tech industry, with a strong focus on innovation and growth.
Data-and-cloud-computing giant Amazon Web Services (AWS) continues to invest in technology, specifically AI technology, despite not meeting expectations in the artificial intelligence race compared to Microsoft and Alphabet. This is evident in AWS's recent offerings like Amazon Bedrock AgentCore, Amazon CloudWatch generative AI observability, and new AI agent deployment capabilities, designed for enterprise scale, security, and reliability.
