Amazon's cloud system AWS reports weaker-than-expected earnings growth

Investors worried over first-quarter sales outlook

Amazon's retail organization offsets cloud weakness with 7% online sales growth

By Greg Bensinger, Deborah Mary Sophia

Feb 6 (Reuters) - Amazon.com financiers drove shares down sharply on Thursday due to weakness in the retailer's cloud computing system and lower-than-expected forecasts for first-quarter earnings and profit.

Amazon's shares fell as much as 5% in prolonged trade after the fourth-quarter profits report, erasing about $90 billion worth of stock market worth, and were last down about 4.2%.

Amazon Chief Financial Officer Brian Olsavsky said he expected the capital investment run rate for this year to be approximately the very same as last year's fourth quarter when the company spent $26.3 billion. Amazon has increased spending in specific to assist develop artificial intelligence software.

The company's sales price quote for the very first quarter failed to satisfy experts ´ expectations, even if a negative effect of $2 billion from last year ´ s Leap Day is included. The company said it anticipates between $151 billion and $155 billion, compared to the average quote of $158 billion. The cloud system, Amazon Web Services, reported a 19% increase in profits to $28.79 billion, falling short of estimates of $28.87 billion, according to data put together by LSEG. Amazon joins smaller cloud suppliers Microsoft and Google in reporting weak cloud numbers.

Chief Executive Officer Andy Jassy said the irregular circulation of computer chips had actually kept back some growth in AWS. "We could be growing faster, if not for a few of the constraints on capacity, and they are available in the form of chips from our third-party partners coming a little bit slower than in the past," he informed financiers on a conference call.

The cloud weakness happens as investors have actually grown significantly impatient with Big Tech's multibillion-dollar capital spending and are hungry for returns from substantial financial investments in AI.

"After extremely strong third-quarter numbers, this quarter the growth rates all missed out on. That's what the marketplace doesn't wish to hear," said Daniel Morgan, senior portfolio supervisor at Synovus Trust. He said this is especially true after the introduction of brand-new rivals in expert system such as China's DeepSeek. Like its competitors, Amazon is investing heavily in artificial intelligence software application development. At its yearly AWS conference in December it flaunted new AI software models that it hopes will draw brand-new business and consumer clients. Later this month, it is set to launch its long-awaited Alexa generative synthetic intelligence voice service after hold-ups over concerns about the quality and speed, Reuters reported earlier this week.

Competitors Microsoft and Google parent Alphabet both posted slowing cloud development in in 2015 ´ s 4th quarter, sending out shares lower. The companies, together with Meta Platforms, said expenses to establish facilities for expert system software application added to dramatically higher awaited capital expenditures for 2025, a total of around $230 billion in between them.

Amazon's retail organization assisted balance out the cloud weak point, with the business reporting online sales development of 7% in the quarter to $75.56 billion. That compared to price quotes of $74.55 billion.

Amazon forecast operating revenue of $14 billion to $18 billion for mediawiki.hcah.in the first quarter of 2025, missing a typical analyst estimate of $18.35 billion.

The company reported earnings of $187.8 billion in the fourth quarter, compared to the quote of $187.30 billion, according to information put together by LSEG.

Advertising sales, a closely seen metric, rose 18% to $17.3 billion. That compares to the typical estimate of $17.4 billion.

Earnings almost doubled to $20 billion from $10.6 billion a year earlier. The Seattle retailer reported incomes of $1.86 per share, compared with expectations of $1.49 per share.

(Reporting by Deborah Sophia in Bengaluru and Greg Bensinger in San Francisco; Additional reporting by Noel Randewich in Oakland, California; Editing by Shounak Dasgupta and Matthew Lewis)