Amazon Shares Tumble as Cloud Growth and Revenue Forecast Disappoint

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New York City - Amazon's stock took a significant hit on Thursday following its fourth-quarter earnings report, with shares falling up to 5% in after-hours trading, wiping approximately $90 billion from its market value. The decline was primarily driven by underwhelming performance in its cloud computing division and lower-than-expected guidance for the first quarter of 2024.

Amazon Web Services (AWS), the company's cloud computing arm, reported revenue of $28.79 billion, representing a 19% increase but falling short of analysts' expectations of $28.87 billion. This weakness in cloud performance aligns with similar trends reported by competitors Microsoft and Google.

CEO Andy Jassy attributed some of the cloud growth limitations to supply chain issues, specifically citing delays in receiving computer chips from third-party partners. "We could be growing faster, if not for some of the constraints on capacity," Jassy explained during an investor call.

The e-commerce giant's first-quarter revenue forecast also disappointed Wall Street. Amazon projects revenue between $151 billion and $155 billion, below the analyst consensus of $158 billion, even accounting for a $2 billion impact from 2023's extra Leap Day.

The company's spending patterns have drawn increased scrutiny, particularly its significant investments in artificial intelligence development. CFO Brian Olsavsky indicated that capital expenditure for 2024 is expected to remain at levels similar to the fourth quarter of 2023, when the company spent $26.3 billion.

Daniel Morgan, senior portfolio manager at Synovus Trust, highlighted growing market concerns about Big Tech's substantial capital investments in AI and the emergence of new competitors, such as China's DeepSeek. "After very strong third-quarter numbers, this quarter the growth rates all missed. That's what the market doesn't want to hear," Morgan noted.

Despite these challenges, Amazon continues to push forward with its AI initiatives. The company is preparing to launch its enhanced Alexa generative AI voice service later this month, following previous delays related to quality and performance concerns.