Amazon's (AMZN 1.60%) stock price slid nearly 8% on July 30 after the e-commerce and cloud giant posted its second-quarter numbers. Its revenue growth fell short of analysts' expectations, and it provided lower-than-expected revenue guidance for the third quarter.

Amazon's decline weighed down other e-commerce and cloud stocks, since it's considered a bellwether of both markets. Many Wall Street analysts also hastily lowered their price targets on the stock, citing tough upcoming comparisons in a post-pandemic market. Let's examine the core conversations revolving around Amazon, whether the bulls or bears have the upper hand, and if it's still a worthy investment.

The glass sphere on Amazon's campus.

Image source: Amazon.

Amazon's big revenue miss

Amazon's revenue rose 27% year over year to $113.1 billion during the quarter, but it missed Wall Street's average forecast by nearly $2 billion. It expects its revenue to grow just 10%-16% year over year in the third quarter, compared to analysts' expectations for 24% growth.

Amazon attributed its slowdown to difficult comparisons against the pandemic-driven acceleration in online shopping a year ago. During the conference call, Amazon CFO Brian Olsavsky noted that since last May, its revenue growth "jumped to the 35% to 45% range and remained at that level through Q1 of this year, when we had 41% growth." But starting in the second quarter, Amazon "began to comp this high sales period from last year, and the year-over-year revenue growth rate has narrowed."

Olsavsky expects the slowdown to continue as "vaccines become more readily available in many countries and people are getting out of their homes." He also noted that Amazon's average spending per Prime member had "moderated compared to spending seen during the peak of the pandemic."

Focus on its two-year CAGR

Amazon's acceleration during the pandemic and its subsequent slowdown makes it difficult to gauge its near-term growth. So instead of focusing on its tough year-over-year comparisons over the next few quarters, Olsavsky advised investors to focus on its two-year CAGR instead.

Olsavsky noted that prior to the pandemic, Amazon was growing its revenue at a two-year CAGR of 21%. But after smoothing out the pandemic-related volatility, Olsavsky still expects Amazon to grow at a two-year CAGR of 25%-30% -- which indicates its core businesses are still strong.

But mind the shifting growth engines

Amazon's long-term growth seems stable, but its core growth engines are shifting. Within the e-commerce segment, its third-party merchants accounted for 56% of its total paid units during the second quarter -- compared to 53% a year ago -- and continue to generate significantly stronger sales growth than its first-party marketplace.

An Amazon driver checks a delivery.

Image source: Amazon.

That shift is worrisome because Amazon has already faced quality control issues in its third-party marketplace and ongoing complaints about counterfeit products from overseas merchants.

Amazon's revenue growth during the second quarter would have even been slower without the help of Amazon Web Services (AWS), the world's largest cloud infrastructure platform, and its advertising business.

AWS' revenue rose 37% year over year to $14.8 billion during the quarter, or 13% of Amazon's top line, and its operating profits jumped 25% to $4.2 billion -- or 54% of Amazon's total operating income. Revenue from its "other" segment -- which primarily consists of its advertising revenue -- soared 87% year over year to $7.9 billion, or 7% of Amazon's top line.

If we exclude AWS and the "other" segment from both periods, Amazon's revenue would have only risen 22% year over year during the second quarter. If we go a step further and also exclude all its third-party seller services, its revenue would have only increased 17% year over year.

Tough tasks ahead for a new CEO

Andy Jassy took over as Amazon's new CEO in early July, but he hasn't presented a clear roadmap for the company's future yet. Jassy previously led AWS, so Amazon's core profit engine -- which subsidizes the growth of its lower-margin retail business -- is clearly in good hands.

Yet Amazon's retail business still faces significant challenges. Superstores like Walmart and Target have gotten better at matching Amazon's prices and delivery options, its dependence on third-party sellers remains a double-edged sword, and it faces pressure to raise its wages and improve its warehouse conditions. Shopify remains a major threat as it convinces independent merchants to set up their own online stores, and niche marketplaces like Etsy are pulling away shoppers who want more unique gifts.

Amazon also needs to aggressively expand overseas to generate fresh growth and reduce its dependence on the saturated U.S. market -- but it's been struggling to pull shoppers away from entrenched regional leaders like MercadoLibre in Latin America and Sea Limited's Shopee in Southeast Asia.

Jassy might need to address these challenges over the next few quarters to convince investors that Amazon isn't losing its edge in the evolving e-commerce market.

The key takeaways

I've owned Amazon's stock for years, and it remains my portfolio's top holding. I'm a bit disappointed in the company's second-quarter numbers and guidance, but the slowdown wasn't surprising at all. Amazon's long-term CAGR still looks healthy, and the stock remains reasonably valued at 46 times forward earnings -- so I'm still willing to hold my shares, maintain a long-term view, and ride out the near-term volatility.