Amazon posts weak outlook despite cautious spending
Amazon.com forecast that its third-quarter revenue will fall short of Wall Street projections despite cautious spending, suggesting a downturn in the demand for cloud computing services.
The e-commerce and technology giant estimated sales between $154 billion and $158.5 billion based on LSEG data, which is less than the average analyst expectation of $158.24 billion.
The tech stock fell following the announcement, plunging more than 6% in after-hours trading. The company’s cloud division, Amazon Web Services (AWS), saw sales in the second quarter rise 19% to $26.3 billion, exceeding market projections of $25.95 billion
Companies are reevaluating their spending due to the current economic situation, which is marked by high borrowing costs and ongoing inflation, especially in sectors like artificial intelligence technologies.
During the call, the company touched on some important topics, including the fact that consumers are still frugal with their spending because of the economic downturn. According to CEO Andy Jassy, since consumers purchase less expensive goods, the average selling price (ASP) of the goods sold has decreased.
When they can, customers “continue to trade down on price,” according to Jassy. “We are seeing faster growth in more discretionary, higher-ticket items like computers, electronics, and TVs than we noticed elsewhere in the industry, but at a slower rate than we are seeing in an economy that is more robust.”
Cloud service companies like AWS are suffering from this conservative approach and are finding it difficult to achieve Wall Street’s high revenue expectations. Amazon CEO Andy Jassy stated, “We continue making progress on some fronts, but perhaps nowhere more so than in resuming the AWS Growth acceleration.”
In the second quarter, revenue at cloud subsidiary Amazon Web Services (AWS) increased by 19% to $26.3 billion, exceeding market projections of $25.95 billion.
Based on LSEG statistics, the firm projects third-quarter revenue of $154.0 billion to $158.5 billion, as opposed to the analysts’ average forecast of $158.24 billion.
The corporate management did not even discuss this matter with analysts during the call; there are other factors influencing consumer buying patterns outside the hectic news cycle.
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