(Reuters) -Amazon.com forecast current-quarter revenue above market estimates on Thursday, encouraged by solid retail business despite pressures from U.S. tariffs on imports, while its cloud computing unit also benefits from strong AI demand.

The company expects net sales to be between $174.0 billion and $179.5 billion in the third quarter, compared with analysts' average estimate of $173.08 billion, according to data compiled by LSEG.

Shares of the company, however, fell about 1% in choppy extended trading. Amazon Web Services, the company's cloud unit, reported a 17.5% increase in revenue to $30.9 billion, edging past expectations of $30.77 billion.

Blockbuster cloud revenue growth at Microsoft ( MSFT ) and Alphabet's Google raised expectations for Amazon's ( AMZN ) cloud unit, Amazon Web Services, the world's largest cloud provider.

Both Microsoft ( MSFT ) and Alphabet cited massive demand for their cloud computing services to boost their already huge capital spending, but also noted they still faced capacity constraints that limited their ability to meet demand.

Though a small part of Amazon's ( AMZN ) total revenue, AWS is a key driver of Amazon's ( AMZN ) profits, typically accounting for about 60% of the company's overall operating income. AWS reported 16.9% growth in the first quarter.

While Amazon ( AMZN ) has poured billions into AI infrastructure, analysts have said that the lack of a strong AI model from AWS is causing some concerns that the company could be trailing behind rivals in AI development, analysts said.

Meanwhile, President Trump's tariffs have dampened the U.S. retail industry, leaving major retailers and consumer goods companies scrambling to protect their margins or resort to price increases, all while ensuring consumer demand remains intact.

In the past, Trump has said the levies will bring manufacturing power and jobs back to the U.S.

Investors have been closely watching Amazon's ( AMZN ) e-commerce unit for any signs that tariff-related uncertainty has dashed consumer confidence. U.S. data showed consumer spending rose moderately in June.

Analysts had said Amazon's ( AMZN ) focus on low prices, quick delivery and the sheer number of product categories have helped cement its position as the No. 1 e-commerce retailer for U.S. consumers, giving it an edge over rivals.

Amazon ( AMZN ) has said it was pushing suppliers to pull forward inventories to ensure supply and keep prices as low as possible. Still, prices for goods made in China and sold on Amazon.com ( AMZN ) have been rising faster than overall inflation, Reuters reported last month.