Strong Cloud Outlook Can't Save Amazon Shares After Soft Quarter

Amazon's stock dropped after it reported third-quarter results that fell short of what investors had hoped for. Management offered an encouraging view of its cloud business, but the numbers for the current period gave traders little reason to look past the present.

Amazon Web Services, the company's cloud unit and a major source of its profit, posted growth that analysts described as modest. Investors have been watching AWS closely for evidence that demand for cloud computing is strong enough to re-accelerate the division. The forecast for the coming period was confident, yet a promise about the future did little to offset a quarter that many saw as underwhelming.

Advertising was the other soft spot. Amazon's ad business has been one of its most closely watched profit drivers, so a weaker pace of growth there stood out. Revenue in that segment did not keep up with Wall Street's expectations, leaving the quarter without a clear bright spot to point to.

The reaction shows how demanding the market has become for large technology companies. A rosy outlook carries less weight when the reported results disappoint, and investors increasingly want proof in the numbers themselves. Attention now shifts to the next quarter, where cloud growth and advertising will be the two metrics to watch most closely.