Amazon warns of slower growth; forecasts revenue below expectations

Amazon outlook: Amazon.com Inc. reported slower online sales growth for the second quarter and forecast revenue for the current quarter below Wall Street expectations, causing its shares to fall nearly 8 per cent in after-hours trading.

Despite reporting a profit and robust cloud computing sales that exceeded analyst forecasts, Amazon's shares declined. This downturn came as investors reacted to the company's projection of lower-than-expected revenue for the upcoming quarter.

Amazon CFO Brian Olsavsky stated on a call that consumers are "continuing to be cautious with their spending, trading down" to more affordable options. 
CEO Andy Jassy also highlighted that customers are prioritising lower-priced products. This shift in consumer behavior is attributed to increased competition from budget retailers like Temu and Shein, which offer a wide range of goods at lower prices.

Online retail segment 

The online retail segment saw a 5 per cent increase in sales to $55.4 billion in Q2, down from a 7 per cent growth rate in the previous quarter. Analysts pointed out that the deceleration in retail sales is contributing to the post-market decline in Amazon’s stock.

Charles Rogers, an analyst at M Science said, “While Amazon shows momentum in cloud computing, the slowdown in retail growth is impacting the stock negatively.” Despite these challenges, Jassy emphasized the strong performance of Amazon Web Services (AWS), which reported a 19 per cent revenue increase to $26.3 billion, exceeding the market's forecast of $25.95 billion. AWS continues to be a bright spot for Amazon, and Jassy highlighted that the company is making significant progress in this area.

Olsavsky also discussed the uncertainty surrounding Q3 revenue projections, citing potential distractions from events like the presidential election and the Paris Olympics. Amazon's recent Prime Day was its "biggest ever," though specific figures were not disclosed.

The company is also investing heavily in artificial intelligence (AI), with capital expenditures reaching approximately $30.5 billion in the first half of the year. This includes $16.5 billion in Q2 alone. Amazon is working to catch up with rivals like Microsoft and Google in developing AI technologies, including its new chatbot, Rufus.

(With Reuters inputs)