Amazon Is Sinking Today -- Is the Stock a Buy Right Now?

Key Points

• Amazon reported its Q2 results yesterday, and the stock is falling despite better-than-expected sales and earnings.

• Investors are concerned that AI spending is eating into profitability, and the broader market is also selling off in response to U.S. jobs data today.

• While Amazon stock could continue to see volatility in the near term, today's pullback could be a buying opportunity.

• 10 stocks we like better than Amazon ›

Amazon (NASDAQ: AMZN) stock is getting hit with significant sell-offs in Friday's trading despite a strong earnings report from the company yesterday. The tech giant's share price was down 7.7% at 11:15 a.m. ET. Meanwhile, the S&P 500 was down 1.6%, and the Nasdaq Composite was down 2.1%.

Amazon posted earnings per share of $1.68 on sales of $167.7 billion, far exceeding the average Wall Street analyst estimate's call for per-share earnings of $1.33 on revenue of $162.11 billion. Despite the big sales and earnings beats, investors are reacting negatively to the company's softer-than-anticipated profit forecast due to high artificial intelligence (AI) infrastructure spending.

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Amazon's share price is also under pressure today due to bearish momentum shaping the broader market. The Bureau of Labor Statistics' jobs report for July came in with much weaker growth than expected, and jobs growth for May and June was revised far below previously reported figures.

Image source: Getty Images.

Is Amazon stock a buy right now?

Amazon's Q2 numbers actually looked quite strong across the board, with margins coming in ahead of expectations and double-digit sales growth for the company's North America, international, and Amazon Web Services (AWS) reporting segments. While some investors may be concerned about the extent of the company's spending on AI, guidance for Q3 sales between $174 billion and $179.5 billion and operating income between $15.5 billion and $20.5 billion hardly suggests problems for long-term investors.

Investing heavily in AI is almost certainly the right move for Amazon right now, and devoting the resources necessary to ensure that it has forefront positions in key aspects of the broad tech category should help create foundations that power huge growth over the long term. For long-term investors, today's pullback on Amazon stock looks like a smart buying opportunity.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.