Amazon stock struggles as cloud revenue misses expectations

In the United States, Amazon's stock experienced a decline of approximately 3% during after-market trading on Thursday, following the announcement of its financial results for the March quarter. While the company reported overall sales and earnings that surpassed expectations, its cloud revenue was reported at $29.27 billion, which was $0.15 billion less than the anticipated $29.42 billion. This shortfall raised concerns among investors and analysts about the company's upcoming performance in an increasingly challenging economic environment. The company’s outlook for the second quarter presented a mixed picture as well. Sales forecasts of $161.5 billion slightly exceeded analyst expectations of $161.2 billion; however, the projected operating income of $15.3 billion fell significantly below the consensus estimate of $17.6 billion. This gloomy outlook highlights Amazon's struggle to maintain its growth trajectory amid economic uncertainties. The management team acknowledged the potential impact of tariffs on the business but indicated that there has been no noticeable slowdown in demand thus far. The backdrop of rising economic challenges significantly influenced investor sentiment. The U.S. economy contracted in the first quarter of 2025, raising inflation concerns due to President Trump's recent implementation of tariffs on key trading partners. Analysts warned that as economic growth slows, companies may need to cut costs, which could have a detrimental effect on spending in cloud services. Such a scenario would particularly impact Amazon Web Services (AWS), the company's most profitable segment, thus creating uncertainty for future profitability. Another factor further complicating the outlook for Amazon is the significant portion of its marketplace products sourced from China. The implementation of higher tariffs is expected to force Amazon and its third-party sellers to increase prices, which could adversely affect consumer purchasing power and dampen overall demand for core e-commerce revenue. While Amazon has a diversified supply chain, the substantial scale of Chinese imports renders the company particularly susceptible to escalating trade tensions. Despite these challenges, the growing AWS business is seen as improving Amazon's overall profitability, leading some analysts to suggest that the stock deserves a higher valuation multiple than its historical average. With the shares now down over 20% from the highs in February, many believe that the risks tied to tariffs are already somewhat priced into the stock, making AMZN a compelling long-term investment opportunity around the $190 mark.