Amazon’s stock took a hit following the release of its fourth-quarter earnings, despite the company surpassing expectations on both revenue and earnings per share. The retail and cloud giant provided a disappointing outlook for the first quarter of 2024, triggering a more than 3% decline in its share price.
Amazon projected Q1 revenue between $151 billion and $155 billion, significantly below analysts' expectations of $158 billion. The company cited an unusually large negative impact of approximately $2.1 billion (or 150 basis points) due to foreign exchange rates. However, a leap year boost added $1.5 billion to net sales.
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Amazon Web Services (AWS), the company's cloud computing arm, reported Q4 revenue of $28.7 billion, marginally missing Wall Street’s estimate of $28.8 billion. While AWS remains the world’s leading cloud provider, Amazon continues to expand its AI infrastructure to stay competitive against rivals such as Microsoft and Google.
During the earnings call, CEO Andy Jassy revealed plans to significantly increase capital expenditure to approximately $105 billion in 2025, up from $75 billion in 2024. The majority of this investment will be directed toward artificial intelligence (AI) and data centre expansion, highlighting Amazon’s commitment to the AI-driven future.
Amazon’s earnings report comes amid mixed results from its cloud competitors. Microsoft reported $40 billion in cloud revenue, missing analysts’ estimates of $41.1 billion, while Google reported $11.9 billion, slightly below expectations of $12.1 billion. This indicates a broader trend of fluctuating cloud sales across the industry.
For Q4, Amazon reported earnings per share (EPS) of $1.86 on revenue of $187.7 billion, exceeding analyst predictions of $1.50 EPS and $187.3 billion revenue. The company showed significant growth compared to the previous year’s Q4 earnings, which stood at $1.00 EPS and $169.9 billion revenue. However, despite these strong numbers, the disappointing Q1 forecast led to a decline in stock value.
Amazon is also facing market turbulence following concerns over China-based AI startup DeepSeek. The company’s unexpected advancements in AI technology raised questions among investors about how a smaller firm with limited resources could rival US tech giants. To stay competitive, Amazon, like Microsoft, has integrated DeepSeek’s AI model into its cloud offerings, allowing users to leverage the technology.
Despite the recent stock dip, Amazon’s long-term outlook remains promising, given its aggressive AI investments and cloud dominance. The company’s increased spending on AI infrastructure signals confidence in future growth, although investors will need to keep an eye on competition and macroeconomic factors that could influence stock performance. However, traders must stay informed about key market movements and signals. Check out our latest Trading Signals to stay ahead of market shifts.
While Amazon’s Q4 results were strong, the weaker-than-expected Q1 outlook has unsettled investors. The company’s expansion into AI and cloud computing remains a key growth driver, but challenges such as currency fluctuations and rising competition may impact short-term performance. Investors should closely monitor Amazon’s strategic moves in the evolving tech landscape.
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