(Reuters) -Amazon shares dipped 3.3% in premarket trading on Friday after the online retailer’s cloud growth fell short of expectations, prompting a subdued sales forecast for the current quarter.
Amazon Web Services (AWS), the company’s cloud division, reported a 19% rise in revenue to $28.79 billion, just shy of the $28.87 billion analysts were expecting, according to LSEG data.
The Seattle-based company joined Microsoft Azure and Google Cloud, the second- and third-biggest cloud players, in reporting weaker-than-expected cloud figures.
It adds to investor concerns about Big Tech’s billion-dollar AI investments, especially with the emergence of cheaper competitors such as China’s DeepSeek.
“It appears, 2025 is a year of investment for AWS with the payoff likely in 2026 and beyond exacerbated by lower initial operating margins in AI,” Pivotal Research Group analyst Jeffrey Wlodarczak said.
“We expect by 2H’25 this heavy capex investment + accelerating AI adoption should begin to materially reaccelerate cloud revenue.”
However, Amazon’s retail segment counterbalanced the cloud weakness, achieving a 7% growth in online sales to $75.56 billion, compared with estimates of $74.55 billion.
At least seven brokerages raised their price targets on the stock following the result, bringing the median target to $260, according to LSEG data. The stock was trading at 230.37 before the bell.
Amazon’s 12-month forward price-to-earnings ratio is 37.3, higher than Alphabet’s 22.7 and Microsoft’s 29.3.
(Reporting by Joel Jose in Bengaluru and Alun John in London; Editing by Amanda Cooper and Anil D’Silva)
