Why Amazon stock was down after Google's news today

Tech giants are sending mixed signals about the cloud market, but it's still in the early innings of growth.

| More on:
A man looking at his laptop and thinking.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of Amazon (NASDAQ: AMZN) were down 3.5% as of 11:16 a.m. ET on Wednesday following a disappointing earnings report from Google parent Alphabet after the market close on Tuesday.

Investors have high hopes that the recent spending push for artificial intelligence (AI) technology can drive strong growth for the cloud computing leaders, including Amazon. While Alphabet's report disappointed, a strong report from Microsoft's cloud business suggests the opportunity is starting to ramp up.

Here's why Wall Street soured on Amazon today

Amazon's cloud services business (Amazon Web Services) has nearly doubled its annual revenue from 2020 through 2022. The business made up 16% of the company's total revenue in the second quarter. But growth has slowed this year as customers tighten spending in an uncertain macro environment. This dynamic is still affecting Google Cloud's growth.

Alphabet's third-quarter earnings report showed that companies are still reluctant to spend big on cloud services in an uncertain business environment. Google Cloud's year-over-year (YOY) growth decelerated to 22% from 28% in the previous quarter.

However, Microsoft Azure posted strong growth of 29% YOY, which suggests the bull case is still alive for the cloud leaders.

Why Amazon stock is still a buy

Long-term investors shouldn't be concerned about near-term demand trends in cloud spending. Comparing growth rates from one quarter to the next just creates confusion and noise that doesn't matter in the grand scheme of things. Investors should be encouraged because it is still early days for the cloud market, especially as companies are just starting to figure out how to use AI with their data.

As the leader in cloud services, Amazon Web Services has a huge amount of data that customers will want to use with AI applications. That spells a big opportunity for Amazon over the long term. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Amazon. The Motley Fool Australia has recommended Alphabet and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Two company executives split a piece of paer down the middle, indicating a company demerger
International Stock News

Nvidia announces a 10-for-1 stock split. Here's what investors need to know.

This marks the largest stock split to date for the chipmaker.

Read more »

International Stock News

Here's why Nvidia stock could sustain its stunning bull run after May 22

One analyst predicts Nvidia's data center business will see massive growth thanks to its new AI chips.

Read more »

Man with hands in the middle of two items with money bags on them.
International Stock News

History says an Nvidia stock-split announcement might be coming on May 22

Nvidia's last stock split occurred amid similar circumstances.

Read more »

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
International Stock News

1 concerning number from Warren Buffett's annual shareholder meeting that should raise flags for investors

The markets have been hot this year and investors could use a little bit of fear right about now.

Read more »

A man looking at his laptop and thinking.
International Stock News

Nvidia stock's next big catalysts could come on May 22. Should you buy shares before then?

Here's why the artificial intelligence (AI) tech leader is likely to beat Wall Street estimates when it reports its fiscal…

Read more »

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

3 reasons to buy Nvidia stock before May 22 (and 1 reason to sell)

Nvidia is still growing at warp speed.

Read more »

woman looking at iPhone whilst working on a laptop
International Stock News

Why has Warren Buffett just sold $20 billion of his biggest investment?

Buffett's latest move is a surprising one...

Read more »

Blue electric vehicle on a green rising arrow with a charger hanging out.
International Stock News

Why Tesla stock rocketed higher today

Musk has been making promises about its FSD software for years, but this weekend could finally be a watershed moment.

Read more »