Amazon Stock Dips as Cloud Growth Lags Rivals
Analysts Urge Investors to “Buy the Pullback”
Amazon’s stock experienced a significant drop following its latest quarterly earnings report, disappointing investors who anticipated more robust cloud growth. Despite the immediate downturn, financial experts are signaling an opportunity for savvy investors to acquire shares at a reduced price.
AWS Trails Competitors Amidst Heavy Investment
Amazon Web Services (AWS) is pinpointed as a primary factor behind the share price decline. While AWS revenue growth met expectations, it failed to accelerate compared to the previous quarter. This stagnation stands in contrast to the impressive performances reported by Microsoft’s Azure and Google Cloud Platform.
The company’s Chief Financial Officer, **Brian Olsavsky**, revealed that Amazon allocated $31.4 billion to capital expenditures in the second quarter. He further indicated that this substantial investment level is expected to continue through 2025.
“AWS continues to be the primary driver, as we invest to support demand for our AI services.”
—Brian Olsavsky, CFO of Amazon
Analyst Confidence Remains High
Despite the stock’s recent performance, several key financial institutions maintain a positive outlook. JPMorgan analysts have reiterated their “buy” recommendation, raising their price target for Amazon shares by $10 to $265, suggesting a potential 23% increase.
UBS analysts, who hold a $271 price target, advised investors against apprehension regarding the company’s escalating investments in AI infrastructure. They argue that selling the stock would imply a belief that Amazon’s leadership is making a financially unsound decision by increasing capital allocation.
“[T]o sell the stock is to believe that management and the board are making the economically irrational decision, in our view, to invest an increasing amount of capital. But we find that to be a difficult scenario to believe, especially for what has been one of the best capital allocators in our space.”
—UBS Analysts
Citi also revised its price target upward to $270. The firm believes the increased capital expenditure signals sustained demand and indicates that AWS is actively addressing its infrastructure capacity limitations. In fact, cloud infrastructure spending globally is projected to reach $380 billion by 2027, according to Statista.
This strategic investment in infrastructure positions Amazon to capture future growth, particularly in the burgeoning field of artificial intelligence.