Amazon has been grappling with the repercussions of a significant cloud outage impacting numerous applications, from fast-food chains like McDonald’s to online trading platforms such as Robinhood Markets. Despite the technical glitches associated with its Amazon Web Services (AWS), Amazon’s stock appears resilient, managing to gain over 4.2% at the start of the week—the company’s best two-day performance since early September, according to MarketSurge data.
The initial trading on Monday revealed the extent of the outage, which sparked chaos across the internet. Yet, Amazon’s stock did not mirror the troubles of its cloud service, showing a modest overall gain for the week even though it faced some pullback on Wednesday. The outage raised concerns among lawmakers and cybersecurity experts, who emphasized the interconnected nature of the internet and how reliant it has become on a few major platforms.
Investors, however, seem to be looking beyond the temporary setback. Mark Malek, chief investment officer at Siebert Financial, pointed out that while the incident highlighted the inherent vulnerabilities of cloud computing, investors appear more focused on Amazon’s potential for AI-driven growth rather than a transient technical failure.
This isn’t the first time Amazon has faced such challenges. A notable outage in December 2021 incapacitated numerous websites during a peak shopping period, yet Amazon’s stock managed to close nearly 3% higher that day. Analysts estimate that AWS will generate around $126.8 billion in revenue this year, a significant increase from $62 billion in 2021. Eric Clark, chief investment officer at Accuvest Global Advisors, expressed confidence that these outages, though disruptive, have historically been temporary and have not severely impacted company performance or share prices.
Before this week’s events, Amazon’s stock had already been showing signs of weakness, trailing the market and remaining just below its 200-day moving average. So far this year, its performance has lagged behind other major tech players, marking just a 1% increase and putting it at the bottom of the so-called “Magnificent Seven.”
The outage has sparked concern about Amazon’s competitiveness in the cloud space. Although AWS remains the leading provider of cloud infrastructure, recent growth rates have not kept pace with rivals such as Microsoft and Google. This has raised alarms about Amazon’s ability to attract business, particularly in the emerging AI field.
Analysts have pointed out the possible financial implications of the outage. D.A. Davidson’s Gil Luria noted the potential for some reputational harm, as well as the need for AWS to provide refunds to affected clients, which may slightly impact financial results in the upcoming quarters. However, many existing customers are unlikely to switch providers due to the high costs associated with such transitions.
The outage was traced back to an issue with Amazon’s DynamoDB database service, primarily confined to regional data centers in Virginia. Following a challenging 15-hour period, Amazon reported that all systems had returned to normal by Monday evening, and its service health page indicated no ongoing issues as of Wednesday.
In the wake of the outage discussions, other positive news surrounding Amazon surfaced. Reports from The New York Times indicated that internal documents revealed the company’s plans to automate a substantial portion of its operations through robotics, which could generate significant savings by 2027. Such developments may have contributed to the stock’s stability amid the outage.
As Amazon prepares for its third-quarter earnings report later this month, Wall Street will be its next major hurdle. Analysts are particularly focused on how AWS’s quarterly revenue growth will compare to previous periods and whether it can achieve a year-over-year growth rate of 20%. The ongoing performance of Amazon’s cloud services stands crucial, especially in light of competition from Microsoft and Google, both of which are set to report earnings shortly before Amazon’s announcement.
The landscape suggests a critical test awaits Amazon, as it navigates both the repercussions of recent technical failures and the intense competition for dominance in the cloud computing market.
