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1 Amazon's Cloud Business Faces Crucial test After Rivals Microsoft,

By Deborah Mary Sophia

Feb 5 (Reuters) - The pressure is on Amazon.com to provide on lofty expectations for cloud computing in its fourth-quarter results on Thursday, after Microsoft and Google's uninspired reports jolted investor faith in Big Tech's billion-dollar financial investments in AI.

Shares of significant tech companies surged in the past two years on the belief that enormous datacenter needs for artificial-intelligence technologies would power financial investment for years.

But that was before Chinese startup DeepSeek said it had attained AI breakthroughs at a portion of the expense, speeding up a selloff in innovation stocks that some say was overdue.

Still, Amazon might be much better located than rivals to capitalize on more affordable AI, experts state, due to its enormous cloud service and lower direct exposure to expensive large-language models that power apps like ChatGPT.

Amazon Web Services, the world's biggest cloud providers, is expected to post its greatest income boost in eight quarters at 19.3%, according to information put together by LSEG.

But Microsoft and utahsyardsale.com Meta were both forced to protect their AI costs strategies last week, macphersonwiki.mywikis.wiki and shares of Google-parent Alphabet slumped 8% on Wednesday after it said it would be investing more on capex than experts expected.

"Microsoft and Google outcomes have actually put even more of a microscope on Amazon's cloud growth," said Dave Wagner, portfolio manager at Aptus Capital Advisors, which holds shares in all three innovation companies.

"But if Amazon can crush it on their cloud numbers, the market's going to definitely enjoy that report."

The business was the first big cloud provider to embrace DeepSeek's AI models last month and has said its capital costs, mainly on AI, would be more than the $75 billion it estimated for 2024.

Slowing growth at Microsoft Azure and Google Cloud, the 2nd- and third-biggest cloud gamers, has sparked some caution from analysts about AWS' efficiency.

"Microsoft said it was capability constrained, Google said it was capacity constrained. More than likely, Amazon is going to say it may have been capacity constrained too and that's why its growth rate isn't quite as much as what the marketplace may have anticipated," said Bob O'Donnell, chief expert at TECHnalysis Research.

Some analysts see the weak point at rivals as a sign that Amazon might have captured up in the AI race through efforts consisting of doubling its financial investment in Anthropic and providing a broad choice of AI models on its cloud platform.

"We actually think that AWS is regaining share. It had actually been growing a lot slower than Microsoft Azure and Google Cloud for a time period, but we think that as Amazon has actually caught up on its AI offering, it may have less of a deceleration than Azure and Google Cloud," D.A. Davidson expert Gil Luria said.

The business has maintained a higher appraisal than some of its rivals, with an existing forward price-to-earnings ratio of almost 39. Microsoft's forward P/E is 29 and Alphabet's 22.4, it-viking.ch according to LSEG information.

RETAIL STRENGTH

The e-commerce giant's outcomes are likewise likely to gain from a healthy vacation shopping season, after rival retailers such as Target and a multitude of garments companies released rosy forecasts over the past month.

Amazon's North American sales for the 4th quarter are projected to rise 9% year-on-year. After a in online sales development earlier this year, analysts say Amazon is primed for a rebound in the retail business, which has actually affected its post-earnings share motions over the previous 2 quarters.

Data from Adobe Analytics revealed U.S. buyers spent lavishly online between November and December 2024, spending more than $240 billion, drawn by deep discounts on whatever from TVs to toys.

The vacation costs development rate of 8.7% nearly doubled from the 4.9% tape-recorded in 2023, the information showed.

Amazon has also attempted to enhance delivery times and expanded item merchandise, including its focus on grocery, drug store and fashion - relocations experts say will assist move growth.

"Most indicators are that it was an excellent quarter. There was a good vacation season for the consumer and so there's a lot of factor to believe Amazon will have succeeded in that side of business," Luria said.

(Reporting by Deborah Sophia in Bengaluru