Weak Amazon, Alphabet results point towards stronger competition

as well as the retail companies Amazon has bullied in recent years.

The fall of as much as 9% in shares knocked more than $80 billion off Amazon’s market value and relegated it behind Microsoft Corp and Apple Inc in terms of market value.

Now that the Seattle-based firm has devoured retail players like Borders, Sears and Toys ‘R’ Us, it is facing bigger challenges from multinationals who are making substantial investments to compete, D.A. Davidson & Co analyst Thomas Forte said.

“Google, Microsoft, and Walmart ... are more difficult to kill,” he said.

Shares i n Alphabet dropped about 2% after it fell short on sales after beating estimates for the past eight quarters.

Revenue from Amazon’s international business, which brings in 27.5% of total sales, was at the heart of the shortfall in results, growth halving to 13.4% compared to the previous quarter.

“We don’t see any real structural issue with Amazon but nearly every line in the business is decelerating a tad and we typically see another deceleration in retail in 4Q, hence are struggling to identify a catalyst,” Barclays analyst Ross Sandler said.

Wolfe Research analyst Scott Mushkin saw two possible reasons Amazon forecast a holiday shopping quarter weaker than anticipated by Wall Street.

“They are worried about the macro. The second thing is they’re worried about competition,” he said, noting that there were both signs of a slowing economy and that major retailers were aggressively deploying strategies to compete with Amazon for holiday sales.

Amazon expected sales in the holiday quarter leading up to Christmas to rise between 10% and 20%, to as much as $72.5 billion, while analysts on average had expected $73.9 billion, according to Refinitiv data.

Its operating profit forecast of between $2.1 billion and $3.6 billion also came in below consensus estimates.

Several analysts called the company’s outlook conservative and said any outright dip in profit seems highly unlikely.

“Overall, Amazon’s growth trajectory remains solid, including advertising, grocery, pharmacy, and specialty retail, as well as Amazon Business ($10 billion in sales in eight countries) and Amazon Web Services,” Telsey Advisory Group analysts said.

Amazon, Alphabet and Microsoft all continued growth in cloud services but with signs of deceleration.

In the latest quarterly reports, Microsoft’s cloud computing business Azure marked revenue growth of 76%, down from 89% in the previous quarter.

Google’s other revenue, which includes its cloud business, grew 29% on year, 4% below estimates of Cowen & Co. analysts. Amazon’s cloud business saw a 46% rise in revenue to $6.68 billion, only narrowly edging past estimates of $6.67 billion.

“In general the cloud business will continue to grow but not at the previous pace and that’s an indication of the market maturity,” says Sid Nag, senior director, cloud technologies and services, Gartner Research. Shares of the company were down 7.2% at $1,654 in midday trade.