Amazon’s (AMZN) stock sank on Friday after the performance of its AWS unit failed to live up to the hype built up by rivals Google (GOOG, GOOGL) and Microsoft (MSFT).
The tech giant announced its second quarter earnings after the bell on Thursday, beating on the top and bottom lines and offering better-than-anticipated Q3 revenue guidance of between $174 billion and $179.5 billion. Analysts were expecting $173.2 billion.
Still, shares fell as much as 8% in premarket trading after Amazon’s guidance for operating income at its AWS cloud computing unit came in at $15.5 billion to $20.5 billion for the third quarter. Wall Street was looking for $19.5 billion.
AWS revenue hit $30.8 billion in the second quarter versus an expected $30.7 billion. It topped $26.2 billion in Q2 last year.
Rival Microsoft, meanwhile, reported that its Azure business generated $75 billion in fiscal 2025, helping to push its market capitalization past the $4 trillion mark in early trading Thursday. Microsoft is only the second company to reach the milestone behind Nvidia (NVDA).
Google parent Alphabet also saw strong results, noting cloud revenue climbed 32% and backlog, or purchase commitments from customers not yet realized, rose 38%. Amazon said Thursday its backlog from AWS customers rose 25% over the prior year to $195 billion.
Wedbush analyst Scott Devitt said in a note late Thursday, “In the coming quarters, we expect concerns around the intermediate-term trajectory of AWS growth rate and margin could remain an overhang on shares as investors contemplate the rising perception of AWS as a laggard in the AI space.”
Devitt is still bullish on Amazon, maintaining an Outperform rating on the stock and a $250 price target.
For the quarter, Amazon reported earnings per share (EPS) of $1.68 on revenue of $167.7 billion. Wall Street was anticipating EPS of $1.33 and revenue of $162.1 billion, according to Bloomberg consensus estimates. The company saw EPS of $1.26 and revenue of $147.9 in the same quarter last year.
Outside of AWS, Amazon posted online store sales of $61.4 billion.
For its retail business, Amazon CEO Andy Jassy said “we just haven’t seen diminished demand” in the first half of the year, nor has it seen “broad scale” changes in selling prices.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
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