Amazon Faces Growing Pressure to Reignite Cloud Growth Ahead of Q3 Results

Amazon (AMZN, Financials) enters its quarter earnings period facing renewed scrutiny over its cloud unit, Amazon Web Services, which continues to drive the company's profitability and valuation.

AWS reported 17% year-over-year growth in the June quarter, matching the prior period but falling short of the 20% analysts expected. The results reignited concerns that capacity constraints and rising competition from Microsoft Azure and Google Cloud may be limiting Amazon's pace of expansion.

Operating margins in AWS declined to 32.9% from 39.5% in the previous quarter as Amazon significantly increased capital expenditures to support artificial intelligence demand. The company invested $31.3 billion in property and equipment during Q2, the highest in its history, representing nearly 19% of total revenue.

Analysts expect Amazon's Oct. 23 earnings report to show whether capacity improvements and AI infrastructure spending can stabilize growth. Even a modest rebound to 1819% annual expansion in AWS could signal that utilization rates are improving and pricing pressures are easing.

Wall Street sentiment remains optimistic, with all 44 analysts tracked by TipRanks rating the stock a Buy and an average 12-month price target of $267.25, suggesting roughly 23% upside.

Investors will focus on whether AWS can regain growth leadership among hyperscalers, as this will likely determine Amazon's near-term stock performance and multiple expansion.