SEATTLE: Amazon’s stock took a significant hit, dropping as much as 5% in after-hours trading on Thursday, following a disappointing earnings report. The tech giant’s market value saw a reduction of about $90 billion, with shares last trading down approximately 4.2%.
The downturn was primarily triggered by weaker performance in Amazon Web Services (AWS), the company’s cloud computing arm, coupled with lower-than-expected forecasts for the first quarter. AWS reported a 19% year-over-year revenue increase to $28.79 billion, which still fell short of the $28.87 billion anticipated by analysts, according to data from LSEG.
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Amazon’s Chief Financial Officer, Brian Olsavsky, indicated that capital expenditure for the year would remain around the $26.3 billion level of the previous quarter’s spending, focusing on the development of artificial intelligence (AI) software among other initiatives.
The first-quarter sales forecast was also a point of concern, with Amazon projecting between $151 billion and $155 billion, below the $158 billion that analysts had expected, even after accounting for a $2 billion negative impact from Leap Day last year.
CEO Andy Jassy highlighted that the growth in AWS was being hampered by inconsistent supply of computer chips from third-party partners. “We could be growing faster if not for some of the constraints on capacity,” Jassy explained during a conference call with investors.
This cloud performance comes at a time when investors are increasingly scrutinizing the massive capital expenditures by Big Tech firms, especially in AI, seeking clearer returns on these investments. Daniel Morgan, a senior portfolio manager at Synovus Trust, remarked, “After very strong third-quarter numbers, this quarter the growth rates all missed. That’s what the market doesn’t want to hear,” noting the rise of new AI competitors like China’s DeepSeek.
Despite the cloud sector’s struggles, Amazon’s retail segment showed resilience, with online sales increasing by 7% to $75.56 billion, surpassing estimates. Advertising sales also grew by 18% to $17.3 billion, though slightly under expectations.
Amazon forecasted an operating profit for Q1 2025 between $14 billion and $18 billion, below the $18.35 billion analysts had projected. The company’s fourth-quarter revenue was $187.8 billion, slightly beating the $187.30 billion consensus. Net income nearly doubled to $20 billion, with earnings per share at $1.86, compared to the expected $1.49.
Key Points
Stock Decline: Amazon’s shares dropped by up to 5% in extended trading after the Q4 earnings report, reducing its market value by about $90 billion.
Cloud Performance: Amazon Web Services (AWS) revenue grew 19% to $28.79 billion, but this was below the expected $28.87 billion.
Earnings Forecast: First-quarter revenue is projected to be between $151 billion and $155 billion, falling short of the $158 billion analyst estimates.
Capital Expenditure: CFO Brian Olsavsky expects capital spending to remain at last year’s Q4 level of $26.3 billion, with a focus on AI development.
Chip Supply Issues: AWS growth is being constrained by inconsistent supply of computer chips, according to CEO Andy Jassy.
Investor Sentiment: Investors are showing impatience with Big Tech’s high capital expenditures, especially in AI, without corresponding growth.
Retail Strength: Despite cloud issues, Amazon’s retail sector performed well, with online sales up 7% to $75.56 billion.
Advertising Revenue: Advertising sales rose by 18% to $17.3 billion, slightly below expectations.
Profit Forecast: Operating profit for Q1 2025 is forecasted at $14 billion to $18 billion, undercutting analyst predictions of $18.35 billion.
Earnings: Q4 net income nearly doubled to $20 billion, with earnings per share at $1.86, surpassing the $1.49 expected.
