After Microsoft’s market value plunged by 500 billion, market attention has shifted to Amazon AWS cloud business earnings.

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Amazon’s upcoming earnings report this Thursday has become the absolute focus of the entire market, as investors urgently seek key clues about the growth prospects of the cloud computing sector. After Microsoft’s sharp correction in share price due to slowing growth in its cloud business, risk aversion sentiment in the tech sector is highly strained.

Since releasing its earnings on January 28, Microsoft’s share price has tumbled 14%, erasing more than $500 billion in market value. The steep drop is chiefly attributed to the slowing growth of its core cloud platform, Azure, which has triggered widespread concerns among investors about the entire industry. Meanwhile, although Alphabet reported strong growth in its cloud business, its announcement of a much higher-than-expected capital expenditure plan for 2026 led to a share price decline in after-hours trading, further intensifying market doubts over tech giants’ high spending in AI and the associated payback cycle.

Current market anxiety is centered on whether Azure’s slowdown is a Microsoft-specific issue or signals broader weakness among cloud service providers. According to Bloomberg, Catalyst Funds Chief Investment Officer David Miller noted: “It’s 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 the latter, the impact may persist.”

Against this backdrop, Wall Street analysts expect Amazon AWS’s fourth-quarter revenue to grow 21% year-over-year to $34.8 billion. Given Amazon’s previously underwhelming stock performance, investors are eager to find a catalyst for upward movement while closely watching margin expansion and the robustness of its retail business.

Valuation and Market Expectations

Amazon’s stock has shown lackluster performance over the past year and is in urgent need of an earnings boost. As the worst-performing stock among last year's “Magnificent Seven,” Amazon rose just 5.2%, and in the start of 2026, its gains have been less than 1%. In contrast, the Nasdaq 100 rose 20% in 2025.

Melissa Otto, Head of Technology, Media and Telecommunications Research at Visible Alpha, said:

“The key is what is already priced into the stock. I think what happened with Microsoft is they started pricing in higher growth rates, and that’s always a little dangerous. We haven’t seen Amazon rally in quite the same way.”

From a historical valuation perspective, Amazon’s current share price is relatively cheap. Its forward price-to-earnings ratio is about 24, far below its decade average of 46 and on par with the Nasdaq 100. Bloomberg option data shows that the stock could see about a 7% swing after earnings. David Miller added that investors are looking for “very high rates of growth,” and that mere “high growth” is no longer enough to meet market expectations.

Key Financial Data Preview

In addition to the expected $34.8 billion in AWS revenue, Wall Street has specific forecasts for Amazon’s overall performance. Analysts project that Amazon’s total Q4 revenue will grow 13% to $211.5 billion, with adjusted EPS to rise 8% to $2.40.

Although Amazon’s shares soared nearly 10% after last October’s earnings thanks to better-than-expected AWS revenue, in the current “anti-software sentiment” dragging down the tech sector, investors are trying to identify winners and losers among tech companies’ multi-billion dollar AI spending based on results.

Capital Expenditure and AI Investment Strategy

Beyond growth in its core cloud business, the market will closely watch Amazon’s guidance for future capital expenditures and its specific progress in artificial intelligence investment. Especially after Microsoft’s aggressive AI-related capex contrasted with slowing growth, it has triggered a fresh round of questions about the returns on these investments.

Investors will scrutinize Amazon’s investment in Anthropic PBC and its potential $50 billion investment in OpenAI. In November 2024, Amazon invested $8 billion in Anthropic, maker of the chatbot Claude. This increase in share value may boost Amazon’s earnings. Previously, Amazon’s Q3 net profit grew 38%, partly attributed to a $9.5 billion pre-tax gain from this investment. Anthropic is currently in financing talks that could value it at $350 billion.

Additionally, investors will be watching the performance of Amazon’s AI chatbot “Rufus” in its retail business to gauge the effectiveness of AI technology in Amazon’s core retail segment.

Cloud Business Remains the Core Indicator

Although Amazon has diversified revenue streams, and its retail and other segments may provide a buffer when AWS underperforms, the cloud business is undoubtedly still the prime focus of investor scrutiny.

Dec Mullarkey, Managing Director at SLC Management, commented: “They do enjoy some diversification advantages, but cloud and AWS are their crown jewels. So, they must present a stable and rather forthright outlook because that will be the center of attention.”

Risk Disclosure and DisclaimerThe market carries risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their specific circumstances. Investing based on this article is at your own risk. ```