Amazon Is the Latest Fall of the Cloud Czars

For a decade Amazon(NASDAQ:AMZN) stock made investors rich and analysts seem smart. The music stopped in 2021. Over the last year Amazon shares are up just 6%, while the S&P average is up 23%.

an image of pills surrounding the Amazon logo
Source: MACH Photos /

Analysts ask, what’s going on? The company continues to grow by 15% at scale. Big retailers like Costco Wholesale (NASDAQ:COST) have become the new hotness, up 43% despite a 2022 downdraft.

Amazon’s cloud still dominates. Its Prime Video has more viewers than any streamer not named Netflix (NASDAQ:NFLX). The store continues to grow.

But as numbers get bigger, they get harder to shift. Growth at AMZN stock is slowing. When it reports on Feb. 1, earnings are expected to be just $3.90/share. Last Christmas they were over $14/share.

Is this the end of the Cloud Czar era?

The Store is the Problem

While stock in all the Cloud Czars rolled over in the last month, AMZN stock was hit hardest. The store is clearly the reason.

While Amazon reported $54.5 billion in service sales during its most recent quarter, most revenue still comes from retailing. Retailing is a low-margin business. The September quarter was the first one where Amazon’s service sales outpaced product sales. 

Growth has slowed at the store. It was just 17% for the first three quarters of 2021. Service sales continued to grow at 40%, close to the pace of Alphabet (NASDAQ:GOOG). Its shares are up a whopping 59% in the last year.

Operating income from Amazon’s North America segment came in at just $880 million during the third quarter, on $65.5 billion of sales. That’s a margin of just 1.3%. Kroger (NYSE:KR) had close to that operating profit on $31.8 billion in sales. 

The store faces intense scrutiny from regulators and continuing unionization efforts.  But the big problem is its  marketplace of third party sellers, a sales model rivals are copying.

What Will Jassy Do?

New CEO Andy Jassy has been surprisingly passive in the face of these challenges. There has been no move to split the stock or even institute a small dividend. There has been no move to split the company, which I’ve suggested is necessary to escape its present value stock trap.

This makes the company’s Feb. 1 earnings release crucial. Expectations are low. The conference call, however, will be even more crucial, with its projections for the future and the possibility of major corporate announcements.

Analysts are still pounding the table for Amazon. Barron’s calls it a buy. Analysts at are telling investors to buy the dip. Every analyst following Amazon at Tipranks still wants you to buy it.  I’m not selling my shares.

Amazon continues to deploy capital at a furious pace, with $14.75 billion in capital spending during the third quarter alone. That’s twice the $7.3 billion in operating cash flow generated during the same period.

The Bottom Line

Investor confidence can turn on a dime, as can analyst support for management.

Jassy needs to make some moves. If Amazon results don’t beat estimates for the Christmas quarter, the stock could fall sharply. It could even fall after beating estimates, if Jassy doesn’t offer something to change the current trajectory.

Amazon is now fourth in market capitalization among the five Cloud Czars. Its $1.67 trillion was passed last year by Alphabet’s $1.86 trillion. While Amazon’s cloud network remains the industry’s largest and most profitable, low-margin store operations are dragging the company’s value down.

Jassy doesn’t have to break the company up. But if he doesn’t change the narrative soon, there’s going to be trouble on Wall Street.

On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at, tweet him at @danablankenhorn, or subscribe to his Substack

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