Amazon stock sinks 7% after earnings: Here are the key takeaways

Core Viewpoint - Amazon's second-quarter earnings exceeded expectations on several metrics, but the stock fell approximately 7% due to weaker profit guidance and underwhelming cloud growth, overshadowing strong revenue and advertising sales growth of 23% [1][2]. Group 1: Financial Performance - Amazon reported a significant capital expenditure of $31.4 billion in the last quarter, with expectations to maintain similar spending in the second half of the year, potentially reaching upwards of $118 billion for the year, an increase from the previous forecast of $100 billion [2][3]. - The company’s online store sales grew 11% year over year, surpassing analyst projections, while seller services revenue also exceeded expectations, indicating a healthy consumer demand despite tariff concerns [16][18]. Group 2: Cloud Business - Amazon Web Services (AWS) revenue grew by 18% year over year, which, while beating Wall Street estimates, lagged behind competitors Microsoft Azure and Google Cloud, which reported growth rates of 39% and 32% respectively [8][11]. - Analysts expressed concerns regarding AWS's competitive positioning in the generative AI space, with some suggesting that AWS may be falling behind its rivals [9][12]. Group 3: AI Investments - The company is focusing heavily on artificial intelligence, with generative AI contributing revenue to AWS at an annualized rate of "multiple billions of dollars" [6]. - CEO Andy Jassy indicated that AI advancements have improved operational efficiency and business growth, although he noted that it is still "very early days" in AI development and adoption [7][6]. Group 4: Tariff and Trade Policies - Amazon has managed to navigate tariff uncertainties better than anticipated, with a combined tariff rate on products imported from China now at 30%, down from a previous 145% [15][18]. - The company has not observed diminished demand or significant price increases, suggesting that tariffs have been effectively absorbed by suppliers and customers [17][18].