Amazon posted what looked like decent numbers on paper yesterday, but Wall Street clearly wanted more. The e-commerce and cloud giant reported net sales of $167.7 billion for the quarter ending June 30, up 13% from a year ago - but shares still dropped about 3% in after-hours trading.
So what gives? In my view, it's all about expectations. Analysts had been hoping for stronger guidance for Q3, especially given the recent strength in consumer spending data. Amazon's outlook suggested growth might be tapering off slightly heading into the fall.
AWS growth came in at 19% - respectable, but below the 20%+ many investors were expecting. With Microsoft and Google both posting stronger cloud results last week, the comparison didn't do Amazon any favors.
"We're making significant investments in AI infrastructure that will pay dividends in coming quarters," insisted CEO Andy Jassy during the earnings call. But investors seem to be in show-me mode rather than tell-me mode.
The company's operating margin did improve to 8.9% (up from 7.8% a year ago), which is something. But in this market - where AI growth stories are driving valuations - Amazon's results just didn't have enough sizzle to justify its recent stock run-up.
I think Amazon will be fine long-term - they usually figure things out - but yesterday's reaction shows how high the bar has been set for Big Tech earnings this season.
