Amazon forecasts lower profit as AWS growth slows and Microsoft posts stronger cloud results
Amazon reported slower-than-expected cloud revenue growth in the first quarter and forecast second-quarter operating income below analyst expectations, according to The Globe and Mail, disappointing investors and prompting a drop in share price.
Shares of Amazon.com Inc. fell by as much as 5 percent in after-hours trading before stabilising.
Amazon Web Services (AWS) posted a 16.9 percent increase in quarterly revenue to US$29.27bn, missing analysts’ expectations of 17.4 percent growth and US$30.9bn in sales.
This marked AWS’s slowest revenue growth pace in five quarters.
The Globe and Mail also reported that Microsoft Corp. posted stronger-than-expected growth for its Azure cloud unit the previous day.
“It’s always felt like AWS and Google Cloud were taking the most share for quite some time, but maybe that’s starting to turn because Microsoft posted great numbers,” said Dave Wagner, portfolio manager at Aptus Capital Advisors.
He added that expectations for Amazon were higher following Microsoft’s performance.
Despite the cloud miss, Amazon’s total revenue for the quarter ended March 31 reached US$155.7bn, slightly above analysts’ estimates of US$155.04bn, according to data compiled by LSEG.
The company projected second-quarter net sales between US$159bn and US$164bn, compared to the average estimate of US$160.91bn, also from LSEG data.
Amazon forecast second-quarter operating income between US$13bn and US$17.5bn, falling short of the average estimate of US$17.7bn.
This outlook came as the company navigated concerns over new tariffs on Chinese goods imposed by US President Donald Trump.
Some sellers told Reuters that they plan to skip participation in Amazon’s Prime Day sales event in July.
On an analyst call, Amazon chief executive officer Andy Jassy addressed the potential impact of tariffs. “We haven’t seen any attenuation of demand yet,” said Jassy.
“We’ve seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact.”
He also said: “We also have not seen the average selling price of retail items appreciably go up yet,” adding that sales of lower-cost essentials continued to rise steadily.
Growth in revenue from third-party seller services slowed to 7 percent in the first quarter, excluding foreign exchange impacts.
However, Amazon’s sales forecast reassured some investors that the company could manage tariff-related risks.
Online advertising revenue rose 19 percent to US$13.92bn, surpassing analyst expectations and reinforcing Amazon’s status as the third-largest digital ad seller behind Meta Platforms Inc. and Alphabet Inc.
On Friday, CNBC reported that Amazon founder Jeff Bezos plans to sell up to 25 million shares over the next year, worth about US$4.8bn at current prices, based on a financial filing.
CNBC stated the sale is part of a trading plan adopted on March 4.
Bezos remains Amazon’s top shareholder and stepped down as CEO in 2021.
The disclosure followed Amazon’s earnings report released late Thursday. Although profit and revenue exceeded estimates, the company’s forecast for operating income fell short of Wall Street expectations.
Amazon faced White House backlash after a report suggested the company might show shoppers the cost of tariffs.
Trump reportedly called Bezos directly to complain, and Amazon clarified that it had no plans to make such a change.
Bezos previously sold about US$13.5bn worth of shares in 2023, his first stock sale since stepping down.
CNBC added that proceeds from his sales have helped fund his projects, including Blue Origin, the Day One Fund launched in 2018, and a US$10bn climate and biodiversity initiative.
