Amazon delivered a rare double miss in its latest quarterly earnings, with revenue of $201.9 billion falling short of the $202.3 billion consensus estimate and earnings per share (GAAP) declining 3% year-over-year to $1.89, missing the $1.96 estimate [1]. The disappointing results were driven by weaker-than-expected retail sales and advertising revenue, causing the stock to decline approximately 6.5% in post-earnings trading following a 4% decline during the regular session, with shares trading around $228 per share and giving back the entire 15% gain from the previous quarter [1].
In response to the earnings miss and shifting investor expectations, Jim Cramer trimmed Amazon's price target to $280 from $300, though he reiterated a buy-equivalent 1 rating [1]. Despite the near-term weakness, the analysis highlights several positive factors supporting the long-term investment thesis, including a multiyear AWS growth outlook, improving margins that allow management to reinvest in the business, and likely conservative guidance that will be beaten [1].
The standout performer was Amazon Web Services (AWS), which accelerated revenue growth for the sixth consecutive quarter to 39.3% year-over-year—the fastest growth rate in nearly five years—with revenue reaching $45.98 billion and operating income of $17.77 billion, beating the consensus estimate of $16.97 billion [1]. Operating margin expanded significantly to 38.65% from 33.64% a year ago [1]. Key growth drivers include Amazon Bedrock, which became the fastest-growing multibillion-dollar service in AWS history, and in-house chips like Graviton and Trainium, with plans to sell chips directly to customers outside AWS beginning in late 2027 [1]. The AWS backlog closed at $578 billion, up triple digits year-over-year and 16% from Q2 [1].
Looking ahead, CEO Andy Jassy projects AWS revenue will grow by over 40% in both 2027 and 2028, well above current consensus estimates of 35.47% in 2027 and 34.8% in 2028, with Jassy believing AWS can become a $1 trillion revenue business over the next five to 10 years [1]. This strong AWS outlook and improving margins provide a counterbalance to near-term retail and advertising weakness, suggesting the market's initial negative reaction may be overdone given the company's long-term growth trajectory.
CONCLUSION
Amazon's rare double earnings miss triggered a significant stock decline and price target reduction, reflecting near-term weakness in retail and advertising segments. However, AWS's accelerating 39.3% growth, expanding margins, and management's ambitious projections for 40%+ growth in 2027-2028 suggest the long-term investment case remains intact, supporting the maintained buy rating despite the trimmed $280 price target.