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Amazon’s stock dropped nearly 8.7% on Friday, following the company’s announcement of mixed second-quarter results and a third-quarter forecast that fell short of Wall Street expectations.
For the second quarter, Amazon reported revenue of $147.98 billion, a 10% increase from the previous year. However, this figure narrowly missed the $148.56 billion projected by analysts. Net income nearly doubled to $1.26 per share, surpassing the estimated $1.03 per share and highlighting the effectiveness of the company’s cost-cutting measures.
Looking ahead to the third quarter, Amazon projected revenue between $154 billion and $158.5 billion, with a midpoint of $156.25 billion. This forecast was below the consensus estimate of $158.24 billion. The company attributed the weaker-than-expected sales to consumers shifting their spending toward lower-cost items and being distracted by recent news events, including the Olympics, the upcoming presidential election, and the assassination attempt on former President Donald Trump.
Despite the retail sector’s underperformance, analysts at JPMorgan expressed optimism about Amazon’s cloud computing division. Amazon Web Services (AWS) generated $26.3 billion in revenue for the quarter, exceeding the expected $26 billion. JPMorgan analysts noted that while retail sometimes leads Amazon’s business, AWS has shown strong performance and has an “overweight” rating on the stock.
BMO Capital Markets analysts also viewed the AWS results positively, highlighting the segment’s accelerated growth for the third consecutive quarter. They believe that AWS is well-positioned to benefit from ongoing cloud modernization and new AI workloads, despite concerns that Amazon is lagging in AI compared to competitors.
Overall, while Amazon faces challenges in its retail business, the strong performance of AWS continues to offer a bright spot for investors.