CNBC’s MacKenzie Sigalos reports on Amazon’s sharp stock drop despite an earnings beat, as AWS lags behind Microsoft and Google in year-over-year cloud growth.

Amazon's stock declined by more than 8% following the release of its latest financial results, which included disappointing operating income guidance for the current period. Although the company surpassed expectations on both revenue and earnings, investor concerns were heightened by the lack of immediate returns from Amazon's significant investments in artificial intelligence and cloud infrastructure.

Amazon plans to spend over $118 billion this year to expand its cloud capabilities, trailing behind Microsoft's $120 billion target and Alphabet's increased spending. While Amazon Web Services (AWS) remains the market leader, it faces strong competition from Microsoft's Azure and Google Cloud, both of which reported faster growth rates. The company also highlighted ongoing risks from tariffs and shifting trade policies, despite strong performance in its retail business.

Amazon sinks over 8% as AWS disappoints, trails cloud rivals

Switching over to Amazon, shares are sharply lower in pre-market trade as disappointing guidance overshadowed a Q2 beat on the top and bottom line. The company issued weaker-than-expected operating income guidance for the current period. Speaking to investors who want to see a return on Amazon's hefty investments into AI, Mackenzie Sagalos filed this report. Despite beating on revenue and earnings, Amazon's weak operating income guidance for the current quarter rattled investors who want to see the company's massive AI and cloud investments start to pay off. Amazon plans to spend more than $118 billion this year, expanding out its cloud infrastructure and software. That CapEx number comes after Microsoft raised its spending target to $120 billion for the current fiscal year and following Alphabet raising its spend by $10 billion in 2025. All of this underscores an unprecedented AI cloud arms race among those hyperscalers. Now, most of Amazon's investment is aimed at expanding infrastructure for AWS, which remains the company's profit engine. And while it's still the market leader in cloud, it faces fierce competition from Microsoft's Azure and Google Cloud, businesses that accelerated 39 percent and 32 percent in the most recent period, respectively. Now, these platforms have become the backbone of AI computing, with demands so strong that even Microsoft has struggled to handle all of OpenAI's workloads. And for the second quarter in a row, Amazon flagged tariffs and shifting trade policies as potential risks, even as its retail business beat in online sales and North America revenue. I'm Mackenzie Sagalos here for CNBC Business News in San Francisco.

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Washington

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Moscow

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Anaconda

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Bryan

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Birmingham

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Hawaii

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Breakdown