On February 7, 2025, Amazon’s stock experienced a 4% drop, causing nearly $100 billion in market value to disappear due to lower-than-expected cloud computing revenue figures. This disappointment left investors unimpressed, especially after similar letdowns from Microsoft and Alphabet.
The pressure on leading US cloud giants to demonstrate that their significant AI investments will lead to accelerated revenue growth has intensified. This challenge was exacerbated when China’s DeepSeek introduced a cost-effective AI model, sparking concerns about the competitive landscape.
Despite the setback, Amazon’s stock is still up by 4% in 2025, while Microsoft and Alphabet have both declined by 3%.
Amazon Cloud Revenue Growth Falls Short
Amazon Web Services (AWS) generated $28.79 billion in revenue in the latest quarter, a 19% year-over-year increase but slightly below analysts’ expectations of $28.87 billion. This growth rate matched the previous quarter, failing to show the acceleration investors had hoped for.
Furthermore, Amazon’s revenue and profit forecasts for the current quarter failed to excite Wall Street, adding to concerns about the company’s performance.
Alphabet and Microsoft also missed investor expectations despite reporting significant increases in their cloud revenue, signaling a broader slowdown in the sector.
A Cloud Slowdown or Capacity Issue?
The fact that major cloud providers like Amazon, Microsoft, and Google all fell short of expectations has raised questions among analysts. Daniel Morgan from Synovus Trust noted that this trend raises concerns about the industry’s direction.
Despite the disappointing numbers, major tech companies continue to invest heavily in AI. Companies like Nvidia, Meta, Microsoft, Tesla, and Alphabet have collectively invested billions in developing AI-driven infrastructure.
Tech Giants Continue Their AI Arms Race
Analysts remain optimistic about Amazon’s future, with none out of 68 analysts recommending selling the stock. While some short-term uncertainty remains, at least 10 analysts raised their price targets for Amazon following its earnings report.
How Amazon Compares to Its Peers
Amazon’s valuation remains a topic of discussion, with a 12-month forward price-to-earnings (P/E) ratio of 37, higher than Alphabet’s (23) and Microsoft’s (29). This reflects investor confidence in Amazon’s long-term potential despite current challenges.
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