On February 7th, Amazon.com's shares dropped by 4% as the company's quarterly cloud computing revenue growth failed to meet investors' expectations following substantial investments in AI technology. This decline mirrored slower growth seen at Microsoft and Google, amid increased scrutiny on U.S. cloud-computing companies' AI spending following DeepSeek's release of a cost-efficient AI model from China the previous month.
The market reaction caused Amazon to lose approximately $100 billion in market value, although the stock is still up 4% in 2025, while Microsoft and Alphabet have each incurred a 3% decrease. Amazon Web Services, the company's cloud division, reported a 19% revenue increase to $28.79 billion, slightly below analysts' expectations of $28.87 billion, maintaining the growth rate from the previous quarter.
In response to these results, Amazon revealed revenue and profit forecasts for the current quarter that failed to impress investors. Similarly, Alphabet and Microsoft experienced notable jumps in quarterly cloud revenue that also fell short of investor hopes.
Concerned by this trend, Daniel Morgan, senior portfolio manager at Synovus Trust, remarked, The fact that all three missed is a bigger story. There's something amiss... it's like okay what's going on? Why are you missing (expectations) if the CapEx guide is going up? We're scratching our heads going 'is it capacity constraints or is something going on that we don't know about?'
Major tech players like Nvidia, Meta Platforms, Microsoft, Tesla, and Alphabet have heavily invested in emerging AI technologies. Despite Amazon's setback, 68 analysts recommend buying Amazon shares, with four maintaining neutral ratings. None suggest selling the stock according to LSEG data.
Following Amazon's financial report, at least 10 analysts raised their price targets on the stock, while four reduced theirs, resulting in a median target of $260, which implies a 13% increase from Friday's stock price. Amazon's 12-month forward price-to-earnings ratio stands at 37, exceeding Alphabet's 23 and Microsoft's 29.