Amazon shares drop as cloud growth, sales forecast lag

By Greg Bensinger, Deborah Mary Sophia

(Reuters) -Amazon.com investors drove shares down sharply on Thursday due to weakness in the retailer's cloud computing unit and lower-than-expected forecasts for first-quarter revenue and profit.

Amazon's shares fell as much as 5% in extended trade after the fourth-quarter earnings report, erasing about $90 billion worth of stock market value, and were last down about 4.2%.

Amazon Chief Financial Officer Brian Olsavsky said he expected the capital expenditure run rate for this year to be roughly the same as last year's fourth quarter when the company spent $26.3 billion. Amazon has boosted spending in particular to help develop artificial intelligence software.

The company's sales estimate for the first quarter failed to meet analysts’ expectations, even if a negative impact of $2 billion from last year’s Leap Day is included. The company said it anticipates between $151 billion and $155 billion, compared with the average estimate of $158 billion.

The cloud unit, Amazon Web Services, reported a 19% rise in revenue to $28.79 billion, falling short of estimates of $28.87 billion, according to data compiled by LSEG. Amazon joins smaller cloud providers Microsoft and Google in reporting weak cloud numbers.

Chief Executive Officer Andy Jassy said the inconsistent flow of computer chips had held back some growth in AWS. "We could be growing faster, if not for some of the constraints on capacity, and they come in the form of chips from our third-party partners coming a little bit slower than before," he told investors on a conference call.     

The cloud weakness occurs as investors have grown increasingly impatient with Big Tech's multibillion-dollar capital spending and are hungry for returns from hefty investments in AI.

"After very strong third-quarter numbers, this quarter the growth rates all missed. That's what the market doesn't want to hear," said Daniel Morgan, senior portfolio manager at Synovus Trust. He said this is particularly true after the emergence of new competitors in artificial intelligence such as China's DeepSeek. 

Like its rivals, Amazon is investing heavily in artificial intelligence software development. At its annual AWS conference in December it showed off new AI software models that it hopes will draw new business and consumer customers. Later this month, it is set to release its long-awaited Alexa generative artificial intelligence voice service after delays over concerns about the quality and speed, Reuters reported earlier this week. 

Competitors Microsoft and Google parent Alphabet both posted slowing cloud growth in last year’s fourth quarter, sending shares lower. The companies, along with Meta Platforms, said costs to develop infrastructure for artificial intelligence software contributed to sharply higher anticipated capital expenditures for 2025, a total of around $230 billion between them.

Amazon's retail business helped offset the cloud weakness, with the company reporting online sales growth of 7% in the quarter to $75.56 billion. That compared with estimates of $74.55 billion. 

Amazon forecast operating profit of $14 billion to $18 billion for the first quarter of 2025, missing an average analyst estimate of $18.35 billion.

The company reported revenue of $187.8 billion in the fourth quarter, compared with the average analyst estimate of $187.30 billion, according to data compiled by LSEG.

Advertising sales, a closely watched metric, rose 18% to $17.3 billion. That compares with the average estimate of $17.4 billion.

Net income nearly doubled to $20 billion from $10.6 billion a year earlier. The Seattle retailer reported earnings of $1.86 per share, compared with expectations of $1.49 per share.

(Reporting by Deborah Sophia in Bengaluru and Greg Bensinger in San Francisco; Additional reporting by Noel Randewich in Oakland, California; Editing by Shounak Dasgupta and Matthew Lewis)