Amazon’s shares took a big hit on Friday, dropping nearly 8% after the company’s cloud computing division failed to impress Wall Street. While the numbers for Amazon Web Services (AWS) were solid, they looked weak compared to the booming growth reported by rivals Google and Microsoft, who are both seeing big returns from their AI investments.
AWS is a critical part of Amazon’s business. While it makes up a small part of the company’s total sales, it’s the main profit engine, typically bringing in about 60% of Amazon’s operating income. In the second quarter, AWS revenue grew by a respectable 17.5%. But that number pales in comparison to the 39% jump for Microsoft’s Azure and the 32% gain for Google Cloud.
As one analyst put it, the AWS results weren’t the “knockout many wanted to see,” especially after seeing such strong reports from its rivals. It highlights just how focused investors are on the AI race right now.
On the retail side of things, Amazon’s core business is holding up surprisingly well. CEO Andy Jassy said the company has so far been shielded from the impact of new tariffs, with prices remaining stable and demand staying strong.
However, the disappointing performance from AWS overshadowed the good news from the retail business. With Big Tech spending billions on AI this year, investors are looking for clear signs of who is winning the race, and this quarter, Amazon looked like it was falling behind.
