Amazon shares fell by about 8.7% on Friday following the company’s mixed second-quarter results and a third-quarter forecast that did not meet Wall Street’s expectations.
Second-quarter revenue increased by 10% year-over-year to $147.98 billion, slightly missing the $148.56 billion estimate by LSEG. Amazon’s net income nearly doubled from the previous year to $1.26 per share, exceeding analysts’ expectations of $1.03 per share, reflecting the positive impact of the company’s cost-cutting measures.
For the third quarter, Amazon projected revenue between $154 billion and $158.5 billion. The midpoint of this range, $156.25 billion, was below the consensus estimate of $158.24 billion according to LSEG.
The company attributed softer-than-expected sales to consumers opting for lower-priced items, such as daily essentials and consumables. Additionally, a hectic news cycle has distracted consumers, leading to delayed purchases or abandoned shopping carts, said Amazon CFO Brian Olsavsky. He cited events like the Olympics, the upcoming presidential election, and the attempted assassination of former President Donald Trump as factors contributing to the challenging quarter forecast.
JPMorgan analysts expressed less concern about the retail shortfall and highlighted the strong performance of Amazon’s cloud computing segment. Amazon Web Services (AWS) revenue reached $26.3 billion in the quarter, surpassing the $26 billion consensus estimate.
“Sometimes Retail leads AMZN’s business and other times it’s AWS,” JPMorgan analysts noted in a client letter, maintaining an overweight rating on the stock.
BMO Capital Markets analysts shared this sentiment, noting their satisfaction with AWS’s accelerating growth for the third consecutive quarter. They believe AWS is well-positioned to benefit from a shift back to modernization, with additional advantages as new workloads are developed in the cloud.
“We believe AWS is well-positioned to benefit from a shift back to modernization, with additional benefits as new workloads are born in the cloud,” BMO analysts wrote, giving Amazon shares an outperform rating. “Despite views that Amazon lags in AI, we see Amazon as a significant AI beneficiary, having already achieved a multi-billion dollar run-rate business in AI.”