The Ratings GameAmazon’s killer cloud growth can’t make up for this more worrisome trendConsumer spending pressures are catching up to Amazon, though at least one analyst thinks the company can win market share in the categories that have become budget priorities
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Emily Bary
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Last Updated: Aug. 3, 2024 at 7:38?a.m. ET
First Published: Aug. 2, 2024 at 4:11?p.m. ET
 Amazon disappointed with its latest revenue figure, despite a beat in the cloud.Photo: David Ryder/Getty Images
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Retailers have spent months warning of pressures on consumer spending. Now it looks like even Amazon.com Inc. isn’t immune.
Lately, the company’s cloud-computing momentum has been the big driver of Amazon’s
AMZN
-8.78%
post-earnings stock moves — and Amazon delivered on the AWS front in the most recent quarter with 19% growth, which was better than expected and an acceleration compared with the prior quarter.
But Amazon shares were punished Friday, falling about 9% as the company reported an overall revenue miss. The company’s commentary suggested that consumer cautiousness could hamper growth in the retail business.
Amazon earnings: Stock falls as rare revenue miss offsets AWS beat
“Consumer spending trends facing Amazon’s retail peers appear to have finally caught up with Amazon’s” financials, wrote MoffettNathanson analyst Michael Morton. “The continued shift towards everyday essentials and [lower-priced] units along with the reduced apparel seller fees to match competitive pressures have caused noise in top-line results.”
Monness, Crespi, Hardt & Co.’s Brian White found the tone of Amazon’s earnings call “less upbeat than past gatherings with Amazon delivering strong AWS results but feeling the drag of this economic quagmire on consumer spending behavior.”
UBS’s Stephen Ju also saw “signs that the consumer is under greater duress this quarter as management called out signs that Amazon’s customers are starting to trade down.” Those issues are weighing on the company’s third-quarter outlook.
While customers are being more conservative about big-ticket purchases, Bernstein analyst Mark Shmulik thinks that Amazon is on track to pick up market share in the areas where people are prioritizing their spending.
Read: Amazon’s stock flashes this downtrend warning for the first time in over a year
“Amazon has leaned in heavily into the essentials category pushing more same-, and one-day delivery,” he said in a note to clients. “Interestingly, one area of margin compression was strength in low-priced apparel goods where Amazon recently took down their referral fees to attract more sellers, and it is working.”
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Elsewhere in the report, there were puts and takes. For instance, MoffettNathanson’s Morton noted the dramatic improvement in the narrative around AWS.
“It feels like just yesterday, consensus decided AWS was the AI loser with Microsoft and OpenAI leaving AWS in the dust,” he wrote. “Fast forward to revenue acceleration, >35% AWS margins, tens of thousands of Bedrock customers, and the market’s growing acceptance that most AI models do not have moats, and AWS is back in vogue.”
Still, he doesn’t love everything Amazon is doing across its business. “We are not excited to see the difficult-to-justify space program of Project Kuiper weighing on [North America] margins,” Morton wrote. The initiative uses satellites to try and expand internet access.
Read: Amazon is sitting on a ‘hidden gem’ worth $46 billion, this analyst says
About the Author
Emily Bary
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Emily Bary is a MarketWatch news editor based in New York.
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