After Microsoft's market value plummeted by $500 billion, the market focus has shifted to Amazon's AWS cloud business financial report

Amazon's upcoming earnings report this Thursday has become the absolute focus of the entire market, with investors urgently seeking key clues about the growth prospects of the cloud computing industry. Following Microsoft's sharp stock price correction due to slowing cloud business growth, risk aversion in the tech sector is currently tense.

Since the earnings report released on January 28, Microsoft's stock price has fallen by a cumulative 14%, with a market value evaporating by over $500 billion. This sharp decline is primarily attributed to the slowdown in growth of its core cloud platform, Azure, raising widespread concerns among investors about the entire industry. Meanwhile, despite Alphabet reporting strong growth in its cloud business, its stock price fell in after-hours trading due to the announcement of a capital expenditure plan for 2026 that far exceeded expectations, further exacerbating market doubts about the high investments and return cycles of tech giants in the AI field.

Current market anxiety centers on whether the slowdown in Microsoft's Azure growth is a company-specific issue or indicative of a broader weakness facing cloud service providers. According to Bloomberg, Catalyst Funds Chief Investment Officer David Miller pointed out: “It is currently unclear how much of Microsoft's disappointing performance is due to company-specific issues and how much reflects an overall slowdown in the cloud sector. If it is the latter, this impact may persist.”

In this context, Wall Street analysts expect Amazon AWS's revenue in the fourth quarter to grow by 21% year-over-year, reaching $34.8 billion. Given that Amazon's stock price has previously lagged, investors are eagerly searching for catalysts for upward price movement while closely monitoring its margin expansion and the robustness of its retail business.

Valuation and Market Expectations

Amazon's stock price has performed mediocrely over the past year and is in urgent need of a performance boost. As the worst-performing stock among last year's "seven giants," Amazon has only risen by 5.2%, and its increase at the start of 2026 is less than 1%. In contrast, the Nasdaq 100 index surged by 20% in 2025.

Melissa Otto, Head of Technology, Media, and Telecom Research at Visible Alpha, stated:

“The key is what has already been priced into the stock. I think Microsoft had previously started to price in a higher growth rate, which is always a bit risky. We haven't seen Amazon rise in the same way.”

From a historical valuation perspective, Amazon's current stock price is relatively cheap. The stock's expected price-to-earnings ratio is about 24 times, far below its 10-year average of 46 times, and in line with the valuation of the Nasdaq 100 index. Options data compiled by Bloomberg indicates that the stock could experience about a 7% volatility after the earnings report is released. David Miller added that investors are looking for “extremely high growth rates,” and merely “high growth” is no longer sufficient to meet market expectations

Key Financial Data Outlook

In addition to the expected revenue of $34.8 billion from the AWS division, Wall Street has also provided specific forecasts for Amazon's overall performance. Analysts expect that Amazon's total revenue in the fourth quarter will grow by 13% to $211.5 billion, and adjusted earnings per share are expected to increase by 8% to $2.40.

Although Amazon's stock price surged nearly 10% last October due to better-than-expected AWS revenue in its earnings report, investors are now trying to sift through the hundreds of billions in AI spending to identify winners and losers amid the current "anti-software sentiment" dragging down the entire tech sector.

Capital Expenditure and AI Investment Layout

In addition to the growth of its core cloud business, the market will closely monitor Amazon's future capital expenditure guidance and its specific investment progress in the field of artificial intelligence. Particularly, after Microsoft's aggressive AI-related capital expenditures contrasted with its slowing growth, new questions have arisen regarding investment returns.

Investors will review Amazon's investment in Anthropic PBC and a potential $50 billion investment in OpenAI. In November 2024, Amazon invested $8 billion in Anthropic, the maker of the chatbot Claude. The increase in the value of this stake could boost Amazon's earnings. Previously, Amazon's profits grew by 38% in the third quarter, partly due to a $9.5 billion pre-tax gain from this investment. Currently, Anthropic is in negotiations for a new round of financing, with a valuation that could reach $350 billion.

Additionally, investors will pay attention to the performance of the AI chatbot "Rufus" in Amazon's retail business to assess the effectiveness of AI technology in its core retail operations.

Cloud Business Remains the Core Barometer

Despite Amazon's diversified revenue sources, its retail business and other divisions may provide a buffer when AWS performs poorly, but the cloud business undoubtedly remains the primary focus for investors.

Dec Mullarkey, Managing Director at SLC Management, stated, "They do have a certain degree of diversification advantage, but the cloud business and AWS are their 'crown jewels.' Therefore, they must present a stable and quite straightforward outlook, as that will be the focal point."