Amazon Shares Drop 8%. Reasons, Jassy’s Tasks, and Why to Avoid $AMZN Stock.

August 3, 2025

Amazon’s Stock Decline After Mixed Q2 Report

Amazon’s stock took an 8.3% hit following a mixed report for the second quarter, which raised eyebrows among investors.

What’s the reason? Well, while Amazon’s retail side performed decently, investors were disappointed with the slower growth of Amazon Web Services (AWS) compared to its competitors like Microsoft Azure and Google Cloud. Concerns were further fueled by CEO Andy Jassy’s unsatisfactory explanation for AWS’s sluggish growth during conference calls.

The core issue with Amazon appears to be its struggle to keep pace in the rapidly evolving AI-driven landscape. As I’ve discussed before, it seems locked into its traditional strategies, but it’s facing stiff competition from companies like OpenAI and Nvidia, who are at the forefront of AI chip design.

Now, Amazon seems to be trying to adapt its cloud service strategies to fit the AI market, but the transition is challenging. Unlike Microsoft and Google, where users have access to integrated AI chatbots, AWS’s approach relies heavily on developers needing technical know-how to select and integrate various services. That can be a barrier for many potential customers.

To gain ground, Jassy should consider three strategies:

Boost the development of integrated AI solutions
Forge partnerships to enhance capacity
Overhaul AWS with more transparency

However, there’s still skepticism around Jassy’s vision for AWS, particularly in competing with faster-growing rivals.

“We believe AI is poised to transform customer experiences,” Jassy stated, referencing the company’s ongoing advancements in AI. He expressed enthusiasm for the future, though some remain unconvinced.

I did reach out to Amazon for their take on this, and I’ll update if I hear back.

Overview of Amazon’s Q2 Performance

The second quarter results, alongside future forecasts, have left analysts wanting more and questioning why AWS isn’t keeping up in this AI era.

Here are some important figures:

Q2 2025 Revenue: $167.7 billion – A 13% rise, with analysts projecting $5.5 billion.
Q2 2025 Adjusted Earnings per Share: $1.68 – Slightly below estimates.
AWS Revenue for Q2: $308.7 billion – A mere 17.5% increase, disappointing when compared to rivals.
Q3 2025 Sales Forecast: $17.675 billion – This is drawing some interest.
Projected Operating Profit for Q3 2025: $18 billion – Under what analysts were estimating.

Companies like Amazon are ramping up their capital expenditures. Amazon’s investment is significant, projected at $118 billion for 2025, while Google and Meta are also increasing their spending.

Investors are looking at growth rates as indicators of future ROI in AI. With AWS lagging behind Microsoft Azure and Google Cloud, there’s a general belief that its current strategy isn’t working.

When analysts pressed Jassy about AWS’s growth, his responses failed to address those concerns head-on, instead framing competition with Microsoft through a lens of security issues. Nevertheless, questions linger about why AWS, with significant market presence, continues to see its share of challengers grow.

Understanding AWS’s Slow Growth Compared to Rivals

Since Jassy didn’t provide clarity, here are a couple of thoughts on why AWS seems to be lagging:

Lack of integrated models: AWS is currently reliant on third-party models and lacks proprietary options like GPT-4 and Gemini. This makes it hard to attract customers, especially since Microsoft has effectively tied user loyalty to its services with OpenAI’s technology.
Insufficient computing power: Amazon is facing infrastructure bottlenecks, from power limitations to GPU shortages. Competitors like Microsoft and Google have developed their own chips and built extensive data centers to address these challenges.

What Amazon Should Focus On to Compete

To move ahead of its competitors, Amazon may want to explore three key strategies:

Develop integrated AI solutions: Building partnerships with leading AI firms could help, along with acquiring startups that specialize in advanced models.
Secure more capacity through partnerships: Long-term agreements with chip manufacturers and energy suppliers could alleviate current constraints.
Reinvent AWS for transparency: Establishing a dedicated AI product team could speed up decision-making. Amazon should aim for practical, integrated AI services similar to those offered by its competitors.

While these strategies could work, implementing them may contradict Amazon’s ongoing culture of self-reliance and innovation, which has been instrumental in its past successes.

Moreover, as a former AWS CEO, Jassy might not fully recognize the shifting landscape of AI, potentially viewing it merely as an infrastructure puzzle to solve.

Market Sentiment on Amazon’s Stocks

Amazon’s stocks have slipped 2.4% in 2025; some analysts question whether they are now underpriced. They express skepticism around the latest report, pointing out that AWS growth isn’t driving overall performance like its peers.

To sum up:

No clear positives: While retail performance was solid, the AWS growth concerns overshadowed any achievements.
Potential missed opportunities in AI cloud: Despite a growing backlog, worries remain that AWS is lagging in AI capabilities.
Lack of competitive strategy: Analysts believe AWS’s approach is less constructive when compared to competitors.

However, despite skepticism, the average price target suggests that Amazon’s stock could recover, albeit contingent on AWS showing signs of accelerated growth.