Online retail Amazon burdened by stingy customers and high AI investments

Amazon grew significantly again last quarter and earned billions. But Wall Street expected more. The share price falls.

Amazon customers are becoming more frugal - and this is causing problems for the world's largest online retailer. At the same time, however, the company wants to focus on investing billions in artificial intelligence and put profit increases on the back burner. None of this is going down well with investors: The share price fell by more than eight percent in pre-market trading on Friday.

Consumers are paying more attention to value for money and are increasingly opting for cheaper items instead of branded products, Amazon emphasized when presenting its figures for the second quarter. This trend is likely to continue in the coming months.

Group CEO Andy Jassy is now taking a rather cautious view of the coming months. Amazon forecast sales of between 154 and 158.5 billion dollars for the current quarter. Analysts had expected an average of a good 158 billion dollars.

Does Amazon need to grant more discounts?

The conservative quarterly outlook and the continuing weakness in consumption are likely to confirm pessimists in their assumption that Amazon will have to offer even more discounts to attract customers at all, wrote analyst Brad Erickson from the bank RBC. However, management has emphasized that the situation has not worsened, but that price levels have been low since last year.

In the past quarter, turnover increased by ten percent year-on-year to around 148 billion dollars. Here too, the market had expected a little more. At the bottom line, profit in the second quarter jumped from 6.75 billion dollars in the same quarter of the previous year to just under 13.5 billion dollars.

Cloud business growing faster than expected

At the same time, the Group exceeded estimates with growth in its important cloud division AWS. Its sales increased by 19 percent to 26.3 billion dollars.

Amazon also wants to benefit in this business from the increased demand for computing power for applications with artificial intelligence. After presenting the quarterly figures, CFO Brian Olsavsky said that Amazon had invested a total of 30.5 billion dollars in the first half of the year. This figure includes expenditure on AWS data centers. The manager plans to invest even more money in the second half of the year. Amazon sees great demand for AI applications.