Amazon reported better-than-expected earnings and revenue for the fourth quarter, but it gave disappointing guidance for the current period. The stock slipped in extended trading.
Here are the numbers:
- Earnings: $1.86 vs. $1.49 per share expected, according to LSEG
- Revenue: $187.79 billion vs. $187.30 billion expected, according to LSEG
Wall Street is also looking at these key numbers:
- Amazon Web Services: $28.8 billion vs. $28.8 billion, according to StreetAccount
- Advertising: $17.3 billion vs. $17.4 billion, according to StreetAccount
Amazon said sales this quarter are expected to be between $151 billion and $155.5 billion. Analysts were expecting $158.5 billion, according to LSEG.
“This guidance anticipates an unusually large, unfavorable impact” from foreign exchange rates, the company said. The impact amounts to $2.1 billion, or 1.5%, Amazon said.
The U.S. dollar index — which measures the greenback against a basket of rivals — hit its highest level in more than two years last month, ahead of President Donald Trump’s inauguration. The dollar climbed steadily from late November through mid-January and has since fallen slightly.
Based on Amazon’s forecast, the company only expects revenue growth of 5% to 9% in the first quarter. At the low end of the range, that would mark the slowest growth on record. Amazon went public in 1997.
Revenue in the fourth quarter rose 10% from $170 billion in the same quarter a year earlier.
Net income almost doubled to $20 billion, or $1.86 per share, from $10.6 billion, or $1 a share, a year ago. Jassy has been on a cost-cutting campaign since late 2022. In 2022 and 2023, the company laid off more than 27,000 corporate employees. Job cuts continued in 2024 and have stretched into this year.
Amazon has been able to bolster profits by the expense trimming and continued strength in the high-margin cloud business. Amazon’s operating margin, the profit left after accounting for costs to run the business, climbed to 11.3% in the period from 11% in the prior quarter and 7.8% in the fourth quarter of 2023.
Sales in Amazon’s cloud division were a hair below consensus estimates, but it’s growing faster than the same quarter last year. Revenue grew 19% during the quarter compared to 13% a year ago. AWS still isn’t growing as quickly as its competitors. Revenue from Azure and other cloud services revenue at Microsoft grew 31%. Alphabet’s cloud revenue was up 30%.
Amazon’s capital expenditures were $27.8 billion during the quarter, compared to $14.6 billion a year ago. The company has been plowing billions into data centers and equipment like Nvidia GPUs to power its artificial intelligence products. The company is responding to increased competition in generative AI from rivals including OpenAI’s ChatGPT, Google’s Gemini and Microsoft’s Copilot, as well as AI startup Anthropic, which counts Amazon among its investors.
Amazon CEO Andy Jassy highlighted the company’s AI investments in the earnings release, including a new set of AI models, called Nova, and its homegrown Trainium chips. Last quarter, Jassy said Amazon planned to spend about $75 billion on capex in 2024 and more this year as part of a push to launch more generative AI services.
“These benefits are often realized by customers (and the business) several months down the road, but these are substantial enablers in this emerging technology environment and we’re excited to see what customers build,” Jassy said in a statement.
Tech companies are under greater pressure from investors to prove their big AI spending is worthwhile, especially following the launch of Chinese startup DeepSeek’s R1 model. DeepSeek claims it only took two months and less than $6 million to develop R1, which it says rival’s OpenAI’s o1. The announcement caught Wall Street and Silicon Valley by surprise, challenging the assumption that tech companies must spend heavily on chips and data centers in order to build cutting-edge AI models.
Advertising revenue increased 18% to $17.3 billion, as brands continue to spend heavily for prominent positioning on Amazon’s app. In recent years, Amazon has emerged as one of the top digital ad companies, behind only Alphabet and Meta in the U.S.
As of Thursday’s close, Amazon shares were up 9% for the year. They rose 44% in 2024, topping the Nasdaq, which gained 29%.
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