- Amazon disappointed investors with weaker revenue growth projections and high spending on AI and cloud infrastructure, raising concerns about slower growth.
- Amazon’s diversified business model enhances profitability through synergies, but its leadership in AI is uncertain compared to Microsoft and Google.
- Valuation estimates Amazon’s stock price at $178 per share, with risks related to AWS losing market share in the battle for AI leadership.
Context
BigTech companies differ from each other because their models are complex, capturing unique pieces of the market. Amazon.com (NASDAQ:AMZN) stands out as a special company.
During its last earnings call, Amazon disappointed investors primarily due to weaker-than-expected revenue growth projections and announced continued high spending, especially related to AI and cloud infrastructure. Despite reporting a 12% rise in total sales and higher-than-expected profits, the company’s forward guidance on revenue fell short of Wall Street expectations, leading to concerns about slower growth (Figure 1) in the coming quarters. Amazon’s significant capital expenditures, particularly in building out its AI capabilities, raised worries about the impact on short-term profitability.
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