Amazon exceeded expectations, but first quarter outlook disappointed

Amazon reported fourth-quarter results that beat analysts' expectations but disappointed with its outlook for the first quarter of 2025. While revenue and earnings per share were higher than expected, the company expects lower earnings in the first three months of this year. Amazon stock fell more than 3% after the results were announced.

Amazon $AMZN reported revenue of $187.7 billion, beating analysts' estimates of $187.3 billion. Earnings per share came in at $1.86, which was above the predicted $1.50. By comparison, in the same period of the previous year, earnings per share were only $1.00 and revenue was $169.9 billion.

Amazon's Web Services (AWS) division posted sales of $28.7 billion, just below the expected $28.8 billion. However, it fared well compared to competing cloud services from Microsoft and Google - both companies also fell short of market expectations.

Amazon announced that it expects revenue between $151 billion and $155 billion, lower than analysts had predicted ($158 billion). The company said the results would be negatively impacted by a foreign exchange difference of $2.1 billion, equivalent to 1.5% of revenue. On the other hand, Amazon said that the leap year in 2024 increased revenue by $1.5 billion.

Amazon plans to invest approximately $105 billion in capital expenditures in 2025, with the majority of the funds going to AI development and data center construction. This is a significant increase from $75 billion in 2024. This massive investment is intended to ensure Amazon's competitiveness against Microsoft and Google, who are also investing massively in AI infrastructure.

Amazon faces a challenge from Chinese AI startup DeepSeek, whose new AI models have raised concerns on Wall Street. Investors are questioning how a startup with a limited budget and no state-of-the-art chips can develop a competitive AI platform. But Amazon has decided to integrate DeepSeek's model into its AI service, allowing users to access the technology directly through Amazon's platform.

Despite strong fourth-quarter results, Amazon's future remains uncertain due to a weaker outlook for early 2025 and growing competition in the AI space. However, the company remains focused on strategic investments that could help it maintain its market leadership.

Disclaimer: There is plenty of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always conduct thorough self-analysis.

Source.