Amazon's Earnings Beat Fails to Impress Wall Street Amid AI and AWS Scrutiny

Amazon released its second-quarter earnings report, revealing financial results that surpassed analyst predictions. However, the company's stock experienced a decline of more than 2% in after-hours trading, as market watchers expressed concern over the performance of its cloud computing division, Amazon Web Services (AWS), and its outlook for the next quarter.

For the second quarter, Amazon's revenue reached $167.7 billion, exceeding the analyst consensus of $162.1 billion. The company's earnings per share (EPS) were $1.68, notably higher than the anticipated $1.33. These results represent a significant improvement from the prior year's second quarter, where revenue was $147.9 billion and EPS was $1.26.

The company's guidance for the third quarter projected revenue between $174 billion and $179.5 billion, a range that topped the expected $173.2 billion. However, the forecast for third-quarter operating income, set between $15.5 billion and $20.5 billion, was broader than analysts had hoped for.

While AWS sales of $30.8 billion just slightly beat expectations, the division's performance failed to match the impressive growth reported by competitors like Microsoft's Azure and Google's cloud services, which saw revenue climbs of 39% and 32% respectively. This comparison fueled investor apprehension.

Amazon's future strategy appears to be heavily focused on artificial intelligence. The company's capital expenditures soared by more than 90% in the second quarter to $31.4 billion, with a large portion of this investment dedicated to developing AI chips and data centers. Jassy also discussed plans to integrate advertising into Alexa+, the company's AI-powered assistant, as a new avenue for revenue. He highlighted that Amazon's overall advertising revenue increased by more than 20% in the second quarter, indicating a growing focus on this business segment.