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Amazon shares fell 8 per cent in after-hours trading as the US ecommerce giant posted underwhelming projections for the third quarter due to high spending on artificial intelligence.
Chief executive Andy Jassy also warned of further uncertainty around President Donald Trump’s tariff policies and said he remained “unsure” who would absorb potentially higher costs over time.
The share price slump came despite Amazon’s strong sales and profit growth in the second quarter. The Seattle-based group’s revenues rose 13 per cent year over year to $167.7bn in the three months to the end of June.
Revenue for the quarter came in better than analysts’ estimates of $162.2bn, according to a S&P Visible Alpha survey. Meanwhile, capital expenditure during the quarter was $31.4bn, with the bulk of spending on AI infrastructure.
Heavy AI spending weighed on profit expectations. Amazon projected that operating income in the third quarter would be $15.5bn-$20.5bn, which fell short of analyst expectations of $19.4bn.
It forecast revenue to be between $174bn-$179.5bn, only slightly above analysts’ expectations of $173bn.
Amazon Web Services, the division that provides cloud computing services and operates data centres, reported a 17.5 per cent increase in sales to $30.9bn, which was in line with Wall Street expectations.
Jefferies analysts said the growth was “disappointing” compared to stronger performance from rivals Microsoft and Google.
Net income for the second quarter was stronger than expected, rising 35 per cent to $18.2bn from the year before.
Amazon is competing with other large technology companies including Microsoft, Google and Oracle to service demand for cloud infrastructure. These companies are directing significant resources to building data centres, which can be used to train and run AI models.
Jassy said earlier this year that Amazon would spend more than $100bn on AI initiatives during the 2025 fiscal year.
“AI is going to be the biggest transformation of our lifetime,” he said during a call with analysts on Thursday. “Every single area of the way we work is likely going to be impacted in some meaningful way by AI.”
“When you have a big shift like that you can either decide to embrace it and help shape it . . . or you can wish it away and have it shape you.”
However, Jassy said that AWS “had more demand than we have supply for at the moment”, citing constraints in power and chip delays.
Amazon is navigating an ever-changing tariff regime and uncertain economic environment as it pushes ahead with these investments.
Analysts at Deutsche Bank said that Amazon has so far benefited from a resilient consumer backdrop and delays in the introduction of steep tariffs which continue to be “kicked down the road” by the White House.
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The ecommerce giant also stands to gain from the removal of the so-called de-minimis exemptions that enabled Chinese online retailers such as Temu to ship low value goods directly from China without paying duties.
Amazon has joined rivals plotting lay-offs as they seek to allay concerns from some investors that significant AI investment has yet to deliver the productivity gains that executives have heralded when marketing the technology.
“We will need fewer people doing some of the jobs that are being done today, and more people doing other types of jobs,” Jassy told employees in a recent memo. “It’s hard to know exactly where this nets out over time, but in the next few years, we expect that this will reduce our total corporate workforce.”