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The results echoed the slowdown at Microsoft and Alphabet-owned Google, and highlighted how U.S. cloud-computing giants were struggling to scale AI as infrastructure bottlenecks cap growth, forcing them to invest billions in data centers with little short-term payoff.
Scrutiny over AI spending has also increased since China’s DeepSeek unveiled a low-cost AI model last month, raising questions over Big Tech’s capital-intensive approach.
Amazon Web Services, the company’s cloud unit, posted a 19% rise in revenue to $28.79 billion, just shy of the $28.87 billion analysts were expecting, according to LSEG data. It also issued downbeat current-quarter revenue and profit forecasts.
“The fact that all three missed is a bigger story. There’s something amiss … it’s like okay what’s going on? Why are you missing (expectations) if the CapEx guide is going up?” said Daniel Morgan, senior portfolio manager at Synovus Trust.
“We’re scratching our heads going ‘is it capacity constraints or is something going on that we don’t know about?'” Still, some analysts noted Amazon’s cloud growth accelerated from the prior quarter, unlike at Microsoft and Google, in a sign the company might be gaining share in the market. “AWS is now adding more cloud business than Azure and Google. The fact that they’ve been able to hold on to their growth while Google and Azure are decelerating tells us that Amazon has regained the lead … and is increasingly taking the lead in AI,” D.A. Davidson analyst Gil Luria said.
At least 10 brokerages raised their price targets on the stock, while four trimmed, bringing the median target to $260, LSEG data showed. The stock was on track to erase $58.88 billion from its market value, if losses hold.
Amazon’s 12-month forward price-to-earnings ratio is 37.3, higher than Alphabet’s 22.7 and Microsoft’s 29.3.
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