(Reuters) -Amazon.com shares fell 4% on Friday after the technology heavyweight’s quarterly cloud computing revenue growth disappointed investors waiting for a bigger payoff from heavy spending on AI.
The results echoed slower-than-expected growth at Microsoft and Alphabet-owned Google, and come as leading U.S. 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.
Friday’s share drop erased about $100 billion from Amazon’s market value. The stock remains up about 4% in 2025, while Microsoft and Alphabet’s stocks have both lost 3%.
Amazon Web Services, the company’s cloud unit, posted a 19% rise in revenue to $28.79 billion, just shy of the $28.87 billion analysts were expecting, according to LSEG data. That was the same growth rate as in the October quarter.
In its report after the bell, Amazon also gave current-quarter revenue and profit forecasts that disappointed investors.
Alphabet and Microsoft also saw large increases in their quarterly cloud revenue that also fell short of investor expectations.
“The fact that all three missed is a bigger story. There’s something amiss … it’s like okay what’s going on? Why are you missing (expectations) if the CapEx guide is going up?” said Daniel Morgan, senior portfolio manager at Synovus Trust.
“We’re scratching our heads going ‘is it capacity constraints or is something going on that we don’t know about?'”
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.
Sixty-eight analysts recommend buying Amazon’s shares, while four have neutral ratings and none recommend selling the stock, according to LSEG.
At least 10 analysts raised their price targets on the stock following Amazon’s report, while four trimmed their targets, bringing the median target to $260, LSEG data showed. That target implies a 13% upside to the stock’s price on Friday.
Amazon’s 12-month forward price-to-earnings ratio was recently 37, higher than Alphabet, at 23, and Microsoft, at 29.
(Reporting by Deborah Sophia and Joel Jose in Bengaluru and Alun John in London; Additional reporting by Noel Randewich in Oakland, California and Juby Babu in Mexico City; Editing by Amanda Cooper and Anil D’Silva)
