An increase in Amazon Web Services spending cut into the cloud giant’s profits in the second quarter as AWS raced to meet demand for AI against Microsoft, Google, and others.

Heavy AI spending weighed on profit expectations. Amazon projected that operating income in the third quarter would be $15.5bn-$20.5bn, which fell short of analyst expectations of $19.4bn. It forecast revenue to be between $174bn-$179.5bn, only slightly above analysts’ expectations of $173bn.

Amazon.com Inc. dropped after projecting weaker-than-expected operating income and trailing the sales growth of its cloud rivals, leaving investors searching for signs that the company’s huge investments in artificial intelligence are paying off.