Amazon Stock Tanks As AWS Misses Whisper Number: 'I Don't Know What's Wrong With It,' Says Gene Munster
Amazon.com Inc. (NASDAQ:AMZN) delivered a strong second quarter but missed expectations on cloud growth, sending shares tumbling and prompting concern from analysts over Amazon Web Services’ momentum.
AWS Misses Growth Whisper, Sparks Analyst Alarm
Amazon reported second-quarter net sales of $167.7 billion, a 13% increase year-over-year and above consensus estimates of $161.9 billion.
However, AWS revenue came in at $10.2 billion, representing 17.5% growth—well below the "whisper number" of 20% that some analysts, including Deepwater Asset Management's Gene Munster, had expected.
"AWS is what's wrong," Munster said during an appearance on CNBC. "The whisper was plus 20% growth. I thought it was going to be like 22%. They did 17.5%."
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Gene Munster Points To Share Loss Versus Azure, Google Cloud
Munster pointed to Amazon's underperformance compared to Microsoft Corporation's (NASDAQ:MSFT) Azure and Alphabet Inc.'s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Cloud.
"They have been losing share over the past couple of years. They lost at a greater pace in the June quarter. That's a problem," he said.
Google Cloud reported revenue of $13.62 billion for the quarter, up from $10.35 billion a year ago, while Microsoft CEO Satya Nadella announced that Azure crossed the $75 billion revenue mark for the full fiscal year, reflecting a 34% year-over-year growth.
While Amazon attributed the miss partly to capacity constraints, Munster wasn't fully convinced. "They would have to be really supply-constrained to justify that number," he said. "There just is still something deeper here."
AI Integration May Be Giving Microsoft The Edge
When asked whether Microsoft is simply doing a better job of integrating AI into Azure, Munster said, "Yeah, I think that they're probably just doing a better job of integrating those AI models into the overall system. That’s Azure. It’s just been a Cloud First company for Azure."
Slowing AWS Growth Clouds Margin Outlook
AWS is Amazon's profit engine, and its slowing growth has significant implications for the company's margins and future investment capacity. While Amazon's operating margins improved overall—rising from 3.5% to 11.4% in two years—Munster said that "it's all about AWS."
"I don’t know what’s wrong with it. I don’t know why it shouldn’t be growing faster, given all the goodness that’s happening in the cloud side," he said.
Amazon Offers Strong Q3 Guidance, But Investors Focus On Cloud
Amazon did offer upbeat guidance for the third quarter, with the high end of its revenue forecast implying 13% growth, ahead of Street estimates. Still, the AWS miss weighed heavily on investor sentiment.
"Management noted on the call that growth was capacity-constrained, with backlog up 25%," Munster later posted on X, formerly Twitter, "offsetting some of my initial disappointment."
Price Action: Amazon shares fell 7.78% to $215.89 in pre-market trading, according to Benzinga Pro.
Despite the drop, Benzinga's Edge Stock Rankings indicate that AMZN maintains strong upward momentum across short, medium and long-term timeframes. Additional performance data is available here.
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