Amazon missed expectations for its cloud computing arm, raising concerns about the tech leader’s investment in artificial intelligence (AI).
On Thursday, the tech behemoth told the market that its cloud division, Amazon Web Services, reported a fourth-quarter revenue of $28.7bn (£23.1bn), slightly below Wall Street forecasts of $28.84bn.
The miss disappointed investors, who were already concerned about the mass investment that has been funnelled into AI infrastructure after the release of a low-cost AI chatbot from Chinese startup DeepSeek.
The new bot shook up global markets, wiping more than $1.2 trillion off tech firms at the opening bell after its launch.
Following its results, Amazon’s shares dropped $12.86, five per cent, to $225.97 in after-hours trading.
Tech companies ramp up AI spending
The update comes amid broader concerns around the cloud computing sector.
Earier in the week, Alphabet, Google’s parent company, reported a 30 per cent increase in revenue for its cloud unit, yet still failed to meet market expectations.
Meanwhile, Microsoft’s Azure business also reported slower growth in the company’s last quarter.
Despite these challenges, Microsoft’s chief executive Satya Nadella stressed the importance of continued investment in AI infrastructure to meet anticipated demand.
“As AI becomes more efficient and accessible, we will see exponentially more demand”, he told analysts.
On Amazon, Matt Britzman, senior equity researcher at Hargreaves Lansdown, said: “A strong investment forecast for 2025 would be a boon for the whole AI trade, especially since Meta, Alphabet, and Microsoft are doubling down on AI investment.”
Despite its cloud shortcomings, Amazon’s total sales climbed ten per cent to $187.8bn in the fourth quarter, driven by a robust holiday shopping season.
The tech giant’s retail arm’s online sales saw an uptick of seven per cent in the quarter, reaching $75.6bn.
Amazon’s chief executive, Andy Jassy, said: “This was our most successful holiday shopping season just yet, and we’re grateful for the customers, selling partners, and employees who made it possible”.