Amazon exceeds revenue expectations but share price falls

The world's largest online retailer disappointed stock market traders with the growth of its cloud division, AWS, and a cautious profit outlook. The share price fell by 6.5 percent in after-hours trading. Amazon presented figures for the past quarter that exceeded analysts' forecasts. Revenue for the world's largest online retailer increased by 13 percent year-on-year to 167.7 billion dollars. Experts had forecast an average of 162 billion dollars. Profit jumped by more than a third to 18.2 billion dollars.

AWS growth slower than rivals

One reason for the share price decline was possibly Amazon's forecast for the current quarter. The group forecast an operating profit range that, at the lower end, is significantly below analysts' expectations. They had forecast an average of 19.4 billion dollars. Amazon anticipates 15.5 to 20.5 billion dollars.

The growth of the cloud division AWS in the past quarter, meanwhile, was 17.5 percent, just about in line with average market expectations. AWS is focusing on the AI boom and competes with the cloud divisions of Microsoft and Google. These recently had significantly higher growth rates. Revenue from Microsoft's cloud platform Azure grew by 39 percent in the last quarter, and Google's cloud business by almost 32 percent.

AI arms race

AWS has been the number one in cloud services such as computing power and storage from the web for years. However, all three rivals are currently investing heavily in the expansion of their data centres, especially for AI applications. In the last quarter alone, Amazon's capital investments were over 31 billion dollars. Chief Financial Officer Brian Olsavsky hinted that this would continue at a similar pace in the second half of the year. Investors are wondering whether the high investments will pay off sufficiently for Amazon.

Amazon CEO Andy Jassy countered in a conference call with analysts that the industry is only at the beginning of artificial intelligence. Amazon wants to attract more customers with lower costs for the operator of their AI software. Amazon still cannot expand capacity fast enough to keep pace with demand.

Open questions around tariffs

In response to questions from analysts about the consequences of the import tariffs introduced by US President Donald Trump, Jassy said that it was still uncertain who would ultimately bear the higher costs. In the first half of the year, Amazon had not yet felt any decline in demand. Many items sold in the US via the group's platform come from abroad and are affected by the import tariffs.