Amazon's cloud revenue continues to disappoint with third straight miss
- Amazon Web Services reported a 17% growth in revenue to $29.27 billion in the first quarter of 2025.
- The revenue fell short of expectations, signaling a third consecutive revenue miss.
- Amazon's investments in infrastructure for artificial intelligence and new service launches indicate ongoing commitment to innovation.
In the first quarter of 2025, Amazon's cloud business experienced a slowdown in growth, with Amazon Web Services (AWS) reporting a revenue increase of 17%, totaling $29.27 billion. This figure fell short of market expectations, which had anticipated $29.42 billion. The growth rate declines from 18.9% in the previous quarter, indicating a trend towards a more challenging economic environment for the tech giant. AWS remains the leading provider of cloud infrastructure services globally, accounting for about 19% of Amazon's overall revenue. Despite Amazon's revenue shortfall, the cloud computing market shows resilience, as evidenced by the strong performance of competitors. Microsoft announced solid Azure cloud growth and positive guidance, while Google disclosed cloud revenue just below expected figures. This performance contrasts sharply with the broader economic signals, as various sectors like automakers and retailers brace for potential impacts from tariff policies. Notably, AWS reported an operating income of $11.55 billion, significantly exceeding the consensus estimate of $10.52 billion. The operating margin of 39.5% represents the highest level since at least 2014 and showcases AWS's financial health even amidst revenue misses. Amazon has been proactive in capital spending, with $24.3 billion allocated for infrastructure enhancements, which is a 74% increase year over year, as it prepares for future demands in artificial intelligence and gaming services. During the quarter, AWS announced initiatives aimed at expanding its footprint in artificial intelligence, including plans to launch a video game streaming service and the establishment of an AI-focused division. As part of a long-term strategy, Amazon CEO Andy Jassy anticipated that costs related to AI would decrease over time, benefiting from proprietary chips designed to optimize operations. With new chip releases, such as the Trainium2 for AI model training, Amazon aims to bolster its AI capabilities and better serve clients, which Jassy believes will drive increased revenues if capacity expands.