Amazon shares tank 4% on weakness in cloud computing unit after Q1 forecasts miss Wall Street estimates

Amazon share price today: Shares of US retail giant Amazon.com fell four per cent on Friday, February 7, 2025, after the technology heavyweight’s quarterly cloud computing revenue growth disappointed Wall Street investors waiting for a bigger payoff from the heavy spending on artificial intelligence (AI). Friday’s share drop erased about $100 billion from Amazon’s market value.

One of Wall Street’s most influential companies, Amazon has topped analysts’ expectations for earnings at the end of 2024, but its stock price nevertheless dropped on Friday after investors focused instead on its forecast for upcoming revenue growth in the first quarter, which fell short of analysts’ expectations. 

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Amazon share price today: What’s weighing on the stock?

Weakness in the retailer’s cloud computing unit, Amazon Web Services, and lower-than-expected forecasts for first-quarter revenue and profit weighed on the stock. The quarterly results echoed slower-than-expected growth at Microsoft and Alphabet-owned Google. Amazon is the biggest shopping destination in the US.

This comes after US cloud-computing companies face greater investor scrutiny over their massive spending on AI after China’s DeepSeek unveiled a low-cost AI model last month. The Amazon stock remains up about four per cent in 2025, while Microsoft and Alphabet’s stocks have both lost three per cent. 

Amazon Web Services, the company’s cloud unit, posted a 19 per cent rise in revenue to $28.79 billion, just shy of the $28.87 billion analysts were expecting. That was the same growth rate as in the October quarter. Alphabet and Microsoft also saw large increases in their quarterly cloud revenue that also fell short of investor expectations.

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The Seattle-based ecommerce and technology company said its revenue for the October-December period totaled $187.8 billion, a 10 per cent jump compared to the same period in 2023. Profits came out to $20 billion while earnings per share reached $1.86, higher than the $1.49 that analysts surveyed by FactSet had anticipated.

But, according to Associated Press (AP), Amazon said it expected revenue for the current quarter to be between $151 billion and 155.5 billion, lower than the $158.56 billion that analysts were expecting. The guidance anticipates “an unusually large, unfavorable impact” from foreign exchange rates, it said.

Wall Street’s most valuable companies, including Nvidia, Meta Platforms, Microsoft, Tesla and Alphabet, have poured hundreds of billions of dollars into a race to dominate the market for emerging AI-related technology. According to news agency Reuters, Amazon’s 12-month forward price-to-earnings (PE) ratio was recently 37, higher than Alphabet, at 23, and Microsoft, at 29.

Amazon’s quarterly report also comes as the retail industry is absorbing a new 10 per cent tariff US President Donald Trump imposed on Chinese imports on Tuesday. Tariffs on Canada and Mexico have been put on hold for about a month.

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The tariffs could benefit Amazon by increasing costs for its competitors. But it would also impact Chinese sellers who connect with American consumers on the company’s shopping platform. It could raise prices on a recently-launched online storefront that Amazon set up to ship low-cost products directly from China. 

According to AP, analysts from Morgan Stanley wrote in a note that Amazon’s first-party retail business, though which the company sells products purchased from manufacturers, has the highest exposure to the tariffs. The analysts estimate 25 per cent of the merchandise sold through that business comes from China.

With inputs from AP and Reuters