AWS Eased Investor's Disappointment In Amazon's Slowing Growth

Amazon Web Services continues to be a star player for Amazon.com, Inc AMZN. As vaccines kicked in and helped the world restore somewhat of normalcy that includes in-store shopping, the hyped demand that amazon enjoyed is slowly weakening. But to be clear, it is nothing dramatic, just enough to frustrate investors who got used to monumental figures. Upon the report last Thursday, shares fell more than 7% in after-hours trading, bringing with them $100 billion from the company's market value.

Q2 Figures

From April through June, Amazon saw $113.1 billion in sales of products and services, growing 27% YoY, helped by Prime Day that resulted in more purchased items than during any prior Prime Day, more precisely 250 million. However, revenue fell short of $115.2 billion analysts had expected, marking a slowdown from the 40% sales growth posted during the same quarter last year, despite having Prime Day in June. 13% of the revenue has been generated by the cloud unit, and 54% of the company's operating income came from AWS, the sole bright spot.

Despite the sales miss, profit did beat expectations at $7.8 billion thanks to AWS which brought $4.19billion.Amazon Web Services generated $14.8 billion in net sales, up 37% YoY, outpacing both its prior second quarter's 29% and this quarter's Amazon's sales growth as a whole.

These mixed results highlight the challenge upon the new CEO, Andy Jassy, who stepped up on July 5^th CEO to replace Jeff Bezos who went on to conquer space. Jassy, previously in charge of AWS, now needs to find a way to maintain whopping sales and profit growth that wrote Amazon's success story.

A Weaker Q3 Guidance

For the undergoing quarter, net sales are expected to increase 10% and 16% from the prior year which translates to a significant slowdown from 37% sales growth reported in 2020's Q3.

Concerns

Amazon was growing way faster in 2020, seeing 40% growth in net sales this time in 2020 fueled by a global pandemic versus 27% this year. Despite its strong numbers, other tech giants have done quite well this quarter, beating investor expectations, making Amazon the odd one out.

Growth is still growth, but it means that Amazon and its investors can't expect to see monumental gains from last year when the world stayed clear of physical shopping. Jassy hasn't revealed if he'll be steering the company differently from Bezos, but these figures clearly show why he's now the man in charge. AWS remains the brightest spot for Amazon, and its leader now has the rest of the empire to look after.

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