Amazon Shares Plummet But Cloud Computing Keeps Dominating

Many investors will focus on Amazon.com‘s (AMZN -12.31%) slow growth and weak revenue forecast for the second quarter as they assess the company’s first-quarter earnings report, released after market close on Thursday. After all, 7% growth represented the company’s worst top-line growth since 2001 – and management’s guidance for Q2 revenue to grow at a rate of just 3% to 7% isn’t encouraging either.

But there was one quote in the report that should help investors in Amazon (and investors in some other cloud computing stocks, for that matter) remain optimistic. While e-commerce may be facing some temporary headwinds, Amazon management seems confident that one trend’s rapid growth trajectory remains unfazed: Cloud computing.

AWS appears unstoppable

Sure, Amazon’s overall results in Q1 were weak. But its paltry 7% net sales growth during the period was primarily due to poor performance in its e-commerce business; it wasn’t a reflection of every Amazon business. Amazon’s online stores segment saw revenue contract 3% year over year. Third-party seller services to support business partners selling goods on Amazon.com saw revenue grow just 7% year over year.

But Amazon’s most profitable segment, Amazon Web Services (AWS), continued to grow rapidly. The cloud-computing segment saw revenue increase 37% year over year during Q1.

Amazon CEO Andy Jassy made sure to highlight that the cloud computing segment is showing off its resilience. A pandemic and a war in Ukraine have “brought unusual growth and challenges,” said Jassy in the company’s earnings release. But this hasn’t stopped AWS ‘momentum. Indeed, it may be benefiting it. “With AWS growing 34% annually over the last two years, and 37% year-over-year in the first quarter, AWS has been integral in helping companies weather the pandemic and move more of their workloads into the cloud,” Jassy explained.

Image source: Getty Images.

More evidence of strength in cloud computing

AWS isn’t the only major cloud computing player demonstrating impressive resilience during these uncertain times.

Consider Microsoft‘s (MSFT -1.81%) earnings report, which was released with the headline, “Microsoft Cloud Strength Fuels Third Quarter Results.” Within Microsoft’s various businesses, the company’s “Azure and other cloud services” segment saw revenue increase 46% year over year, or 49% in constant currency, in the company’s fiscal third quarter (coinciding with the first quarter of the calendar year).

Meanwhile, Alphabet ‘s (GOOG -1.60%)(GOOGL -1.77%) Google Cloud saw first-quarter revenue increase 44% year over year. “[W]hen I look at the innovation in the product pipeline [for Google Cloud] and the overall demand we are seeing and how early our journey is, there’s definitely a lot to look forward to, “said Alphabet CEO Sundar Pichai in the company’s first-quarter earnings call when asked about how the company thinks of its cloud computing segment’s next leg of growth.

Many sectors of the economy have been negatively affected by supply chain disruptions and the war in Ukraine. But much of the cloud computing industry seems to be largely immune to these challenges for now.

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