Amazon's stock experienced a downturn despite exceeding overall revenue expectations in its fourth-quarter earnings report. Investors were underwhelmed by the growth of Amazon Web Services (AWS), its cloud computing unit, and the company's forward-looking guidance. Shares fell by as much as 5% as AWS revenue grew by 19% year-over-year to $28.8 billion, slightly missing analyst estimates of $28.87 billion. This tepid growth in AWS, a significant profit driver for Amazon, has raised concerns about a potential slowdown in the artificial intelligence (AI) industry and its impact on the tech giant.

The dip in Amazon's stock mirrors similar reactions to earnings reports from Microsoft and Alphabet (Google), both of which also reported disappointing cloud growth. This collective underperformance suggests broader challenges in the cloud computing sector, potentially stemming from infrastructure bottlenecks that are capping growth13. These bottlenecks are compelling major tech companies to invest heavily in data centers to scale AI capabilities, requiring significant capital expenditure. The increased scrutiny over AI spending has further intensified following the emergence of China's DeepSeek, which unveiled a low-cost AI model, raising questions about the capital-intensive strategies of Big Tech.

Despite the disappointing cloud growth, Amazon's overall revenue for the fourth quarter reached $187.8 billion, surpassing analysts' expectations. The company reported an 88% surge in earnings, amounting to $20 billion. North America sales saw a 10% boost, reaching $115.6 billion, while international sales increased by 8% to $43.4 billion. Amazon's e-commerce segment is also focused on accelerating delivery times, incorporating robotics into warehouses, and establishing more same-day delivery sites. Furthermore, the company highlighted the momentum in its advertising business as it expands into streaming and live broadcasts.

Looking ahead, Amazon anticipates revenue between $151 billion and $155.5 billion for the current quarter, falling short of the $158.5 billion analysts had estimated. The company cited an "unusually large, unfavorable impact" of approximately $2.1 billion due to foreign exchange rates. Despite these challenges, Amazon remains optimistic about AWS's future, expecting growth to be "lumpy" over the next few years as enterprise adoption cycles, capacity considerations, and technology advancements impact timing. Amazon is making DeepSeek available on its SageMaker and Bedrock AI development platforms and has introduced its new Trainium2 custom chip for AI, positioning its semiconductor offerings as a lower-cost solution for developers.