How are energy investors positioned?
Amazon’s (NASDAQ:AMZN) stock is plunging over 7% in premarket trading Friday despite delivering second-quarter earnings that soundly beat Wall Street expectations. The e-commerce and cloud computing giant reported earnings per share of $1.68, crushing the $1.33 estimate by 27.66%, while revenue of $167.7 billion also exceeded the $162.09 billion forecast.
However, investors are spooked by the company’s disappointing operating income guidance for the current quarter, overshadowing what were otherwise strong financial results across key business segments.
Amazon’s Earnings Beat Overshadowed by Weak Guidance
Amazon delivered across-the-board beats in its second-quarter results, with revenue growing 13% year-over-year to $167.7 billion, marking an acceleration from the 10% growth seen a year ago.
The company’s cloud computing unit AWS generated $30.87 billion in revenue, slightly above the $30.8 billion expected, while advertising revenue surged 23% to $15.69 billion, beating estimates of $14.99 billion. CEO Andy Jassy emphasized the company’s AI progress, stating that artificial intelligence continues to improve customer experiences and operational efficiency.
However, the positive earnings momentum was quickly overshadowed by Amazon’s conservative guidance for the third quarter.
The company expects operating income between $15.5 billion and $20.5 billion for Q3, falling short of analyst expectations of $19.48 billion according to StreetAccount. This guidance disappointed investors who are eagerly waiting to see returns on Amazon’s massive $100 billion AI investment commitment for 2025, as the company races to build out data centers and AI software capabilities.
Amazon Shares Drop in Premarket Trading
Amazon shares are trading at $215.43 in premarket, down $18.68 or 7.98% from Thursday’s close of $234.11. The stock had gained 1.70% during regular trading hours before the earnings release, but quickly reversed course in extended trading as investors digested the weaker-than-expected guidance.
The decline represents a significant market cap loss for the $2.49 trillion company, highlighting how forward-looking guidance often carries more weight than historical performance for growth-oriented tech stocks.
Despite the premarket selloff, Amazon maintains strong analyst support with price targets ranging from $195 to $305, and an average target of $253.30. The company’s year-to-date performance shows a 6.71% gain, slightly trailing the S&P 500’s 7.78% return.
Analysts from firms like Pivotal Research maintain buy ratings, though the market’s immediate reaction suggests concerns about whether Amazon’s hefty AI investments will translate into near-term profit growth as competition intensifies in the cloud computing space against Microsoft (NASDAQ:MSFT) Azure and Google (NASDAQ:GOOGL) Cloud.
***
Looking to start your trading day ahead of the curve?Get up to speed before the bell with Bull Whisper—a sharp, daily premarket newsletter packed with key news, market-moving updates, and actionable insights for traders.Start your day with an edge. Subscribe to Bull Whisper using this link.