Amazon.com shares fell 2% on Friday after the company reported weaker-than-expected cloud revenue growth, raising concerns over Big Tech’s heavy AI investments and their delayed returns.
Amazon Web Services (AWS) posted a 19% revenue increase to $28.79 billion, just below analysts’ $28.87 billion forecast. The company also issued a downbeat outlook for the current quarter. Similar slowdowns at Microsoft (MSFT.O) and Google (GOOGL.O) signaled infrastructure challenges, forcing cloud giants to invest billions in data centers with little immediate payoff.
Scrutiny over AI spending has intensified, especially after China’s DeepSeek introduced a low-cost AI model, challenging Big Tech’s capital-heavy strategy. Investors remain uncertain whether capacity constraints or other issues are hindering growth. “The fact that all three missed is a bigger story,” said Daniel Morgan of Synovus Trust.
However, Amazon’s cloud growth outpaced Microsoft and Google, suggesting it may be regaining market share. “AWS is now adding more business than Azure and Google, reinforcing its lead in AI,” said Gil Luria of D.A. Davidson.
At least 10 brokerages raised their price targets, while four trimmed them, setting a median target of $260, according to LSEG data. The stock’s dip could erase $58.88 billion in market value. Amazon’s forward price-to-earnings ratio stands at 37.3, higher than Alphabet’s 22.7 and Microsoft’s 29.3.
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