Amazon shares plunged 4.2% after weak cloud growth and a tepid Q1 forecast rattled investors, erasing $90B in value. CEO Andy Jassy cited chip supply issues as a reason for AWS’s slowdown.
Amazon’s stock plunged Thursday when its cloud computing sales and a downbeat first-quarter sales guidance spooked investors. Amazon’s shares fell as much as 5% in extended trading, wiping out almost $90 billion in value, before closing at a 4.2% drop.
Amazon Web Services and Amazon’s cloud division grew 19% in quarterly sales to $28.79 billion but missed the $28.87 billion estimate. That cloud computing underperformance closely shadowed similar weakness at its competition, with the sector dealing with supply shortages and rising expenses.
Amazon’s Chief Executive Andy Jassy confirmed that computer chip shortages with its third-party providers hindered AWS expansion. He stated:
“We could be growing faster if not for some of the capacity constraints, and they come in the form of chips from our third-party partners coming a little bit slower than before,”
Revenue Forecast Falls Below Expectations
Adding to investor concerns, Amazon’s revenue forecast for the first quarter of 2025 ranged between $151 billion and $155 billion, falling short of Wall Street’s $158 billion estimate. The company pointed to foreign exchange fluctuations as a major factor, estimating an “unusually large, unfavorable impact” of $2.1 billion due to the strengthening of the U.S. dollar. Additionally, Amazon noted that last year’s leap day had contributed $1.5 billion in extra sales, making year-over-year comparisons appear weaker.
Amazon’s operating income guidance between $14 and $18 billion did not make an impact, with $18.3 billion having been forecasted by analysts.
Despite the drop in its stocks, its retail operations at its core continued to report strong performance, with North American sales rising 10% to $115.6 billion and international sales rising 8% to $43.4 billion in its fourth quarter.
AI Investments Remain a Priority Despite Market Uncertainty
Amazon continues to build out its artificial intelligence investments, which are regarded as a long-term growth opportunity. In response to questions about whether lowered AI expenses will slow down spending, Jassy emphasized that AI enhancements will yield dividends for Amazon and its buyers in the long run. “The cost of inference coming down is going to be very positive for customers and for our business,” he stated.
The company has integrated DeepSeek AI into its SageMaker and Bedrock platforms, launched its Trainium2 custom AI chip, and is developing over 1,000 generative AI applications. It also includes the Rufus shopping assistant and Amazon Lens visual search tool.
However, Jassy cautioned that AWS’s growth may remain volatile in the coming years due to shifting enterprise adoption cycles, capacity constraints, and rapid advancements in AI technology. “Though we expect growth will be lumpy over the next few years… it’s hard to overstate how optimistic we are about what lies ahead for AWS customers and business,” he said.
