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By Deborah Mary Sophia and Greg BensingerAmazon.com on Thursday forecast third-quarter sales above market estimates, but failed to live up to lofty expectations for its Amazon Web Services cloud computing unit after rivals handily beat Wall Street forecasts. Shares plunged by more than 7% after-hours. Before releasing the results, Amazon had finished regular trading up 1.7% to $234.11. Both Google-parent Alphabet and Microsoft posted big cloud computing revenue gains this month. AWS profit margins also contracted. Amazon said they were 32.9% in the second quarter, down from 39.5% in this year’s first quarter and 35.5% a year ago. The second-quarter margin results were at their lowest level since the final quarter of 2023. „AWS is their growth engine and to see that drop in margin is dropping the stock“, said Ken Mahoney, CEO of Mahoney Asset Management. „The market was looking for further fireworks to take this up back to new highs and beyond.“ AWS reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion. By comparison, sales for Microsoft’s Azure rose 39% and Google Cloud gained 32%. Amazon expects total net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts‘ average estimate of $173.08 billion, according to data compiled by LSEG. The range for operating income in the current quarter was also light. Amazon forecast between $15.5 billion and $20.5 billion, compared with expectations of $19.45 billion. Both Microsoft and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand.
