Bezos' Baby Plunges -11% While Amazon's AWS Proves to be Beacon of Hope...

If Microsoft's earnings were “bleh” and Meta’s earnings were more than fantastic, Amazon’s recent earnings results are perfectly settled in the middle. Which honestly, seems about right given the drastic mood swings of the market recently.

(Source: Giphy) 

One day we are up, and then one day we are down, and when it comes to Amazon’s report after the close yesterday, this is exactly what it felt like. For instance, starting off with the good news for investors, Amazon Web Services (AWS) is no doubt still the low key golden child of the Bezos empire.

(Source: Data Center Dynamics) 

AWS raked in a solid $26.3 billion, beating the Street’s estimate of $26 billion. That’s a tidy 19% year-over-year growth, and more than the “whisper” number amongst analysts on Wall Street. This beat had Amazon’s CFO, Brian Olsavsky, taking it upon himself to remind degenerate investors that AWS is a multi-billion dollar business. And because of this, Amazon is now justified to raise its capital expenditures to $30.5bn in order to build more data centers for the cloud business. 

This gave investors an added jolt of confidence for Amazon when it comes to its continuous competition with Microsoft’s Azure and Google in the tech race. 

(Source: CNBC) 

But, but, the stock tanked nearly -11% after hours, didn’t it?

Yes it did, because even though Amazon easily beat bottom line estimates, thanks to AWS, Amazon’s total revenue struggled as it came in at $147.98 billion, just shy of the $148.56 billion that analysts were hoping for. 

(Source: Yahoo Finance)

And their guidance for the next quarter? Well, let's just say it's about as exciting as a clearance bin at a dollar store. Amazon forecasted revenue between $154 billion and $158.5 billion, which is a smidge below the $158.24 billion analysts had penciled in. 

(Source: Giphy) 

So with that said, while Amazon continues to look like the ecommerce monopoly of the world, what’s dragging revenue down? Well, consumers are naturally shifting their spending budget to even cheaper alternatives (with even more microplastics) like: Temu and Shein. 

(Source: Instagram)

Consumers are tightening their belts and opting for cheaper options, which means Amazon’s average selling prices (ASP) are taking a hit. Olsavsky admitted, “What we’re seeing is really around ASP and lower ASP in products selected by customers. They are continuing to be cautious in their spending and trading down to lower ASP products.” Translation: We can’t compete with China’s sweatshops. 

(Source: New York Intelligencer) 

In addition to the top line revenue miss, Amazon’s ad business, (usually a money printer that would make Jerome Powell blush) stumbled a bit too. Advertising revenue hit $12.8 billion, missing the $13 billion mark. While a 20% year-over-year growth is nothing to sneeze at, it’s still a miss. See: Close only counts in horseshoes and hand grenades.  

(Source: X) 

Of course, while Temu and Shein are the main culprits of Amazon’s top line woe’s, Olsavsky oh so kindly blamed the revenue miss on… world events. Yep, apparently the Paris Olympics and an attempted assassination of Donald Trump have been distracting consumers and advertisers. Who knew? Honestly, I find that hard to believe, especially since those “Missed Me” Trump hats are selling like hotcakes over the internet. 

(Source: White Horn Ranch Company) 

But alas, despite the hiccups, it’s clear Amazon is still investing heavily in its future. Olsavsky announced that capital expenditures would ramp up in the second half of the year, primarily to support AWS’s infrastructure. This CapEx raise also follows after Amazon’s deep dive into generative AI and custom silicon chips, as they try to seal their own dominance within the ever evolving landscape of tech. 

(Source: Giphy) 

However, with all of that said, what’s the takeaway here when it comes to us investors? 

Well there’s a few things to consider: For one, Amazon’s core retail business is definitely feeling the heat from cheaper competitors like Temu and Shein due to their ridiculously cheap prices (despite their god awful shipping times). On the other hand though, Amazon’s AWS continues to shine like a beacon of hope. 

(Source: Instagram) 

In addition, while the company’s ad revenue didn’t quite hit the mark, and their guidance left investors yawning, Amazon’s commitment to expanding AWS and investing in AI is a positive sign for investors going forward.So again, as mentioned at the beginning of this article, Amazon’s earnings report is a bit like ordering a mystery box online—we got some diamonds, but we also got a bag of rocks for the weight. 

And even though the stock might have taken a tumble, there’s definitely still meat on the bone for investors who believe in Amazon’s long-term vision. 

(Source: Giphy) 

Now we’ll see what today’s trading tells us going into the weekend, but as of now the majority of investors are still sulking in the disappointing top line misses as Amazon is currently down -11.85% on the day. 

Stocks.News holds positions in Microsoft, Meta, Google, and Amazon as mentioned in the article.