Amazon | 1Q25 Analysis: E-commerce giant disappoints investors with weaker outlook

Amazon, one of the largest technology companies in the world, continues to grow, but the current outlook suggests some challenges. The giant has achieved significant revenue growth in recent months, but the pace of growth is slowing in some areas, particularly in the AWS cloud services segment. In this article, we look at the latest financial results, the expected outlook for the first quarter of 2025, and the news that Amazon has unveiled.

Amazon $AMZN is one of the largest and most influential technology companies in the world. It was founded by Jeff Bezos in 1994 as an online bookstore, but has gradually grown into a wide range of industries. Today, Amazon is a global leader in e-commerce, cloud services, digital streaming, and artificial intelligence.

Amazon's mainstay is its e-commerce platform, which sells millions of products directly and through third parties. In addition to online retail, it operates a network of brick-and-mortar stores, such as Amazon Fresh and Whole Foods Market, focused on selling groceries.

Another key area is Amazon Web Services (AWS), one of the world's leading cloud service providers. AWS offers businesses and institutions the infrastructure to store data, develop applications and run digital services.

Amazon also operates in the digital entertainment sector. It owns the Prime Video streaming platform, competing with Netflix and Disney+, and operates services such as Amazon Music and Twitch, a popular live streaming platform. Smart home and artificial intelligence is also an important segment, where Amazon is developing the Alexa voice assistant and devices such as Echo and Ring.

The company has a global footprint, with offices and logistics centres around the world. The most important markets are the US, Europe, India and Japan, but it is constantly expanding into other regions. Amazon is also known for its innovation in logistics, with advanced warehouses, drone delivery and its own transportation ecosystem.

Key milestones in Amazon's growth

1995: Launch of Amazon.com as an online bookstore
1999: Expansion of offerings to include music, videos, toys and electronics
2002: Launch of Amazon Web Services (AWS)
2005: Launch of Amazon Prime
2007: Launch of the first Kindle reader
2014: Launch of Amazon Echo and Alexa voice assistant
2017: Acquisition of Whole Foods Market, a major entry into the brick-and-mortar segment
2018: Crossing the 100 million mark for Amazon Prime members worldwide
2020: Jeff Bezos steps down as CEO, Andy Jassy becomes the new CEO

How was the last quarter?

At the close of Q4 2024, Amazon achieved a 10% increase in net sales to $187.8 billion, up from $170 billion in Q4 2023. Excluding the $0.9 billion unfavorable impact of changes in foreign exchange rates, sales grew 11%. Revenue in the North America segment grew 10% to $115.6 billion, while the International segment grew 8%, or 9% after adjusting for exchange rates. The AWS segment reported a 19% increase in revenue, which reached $28.8 billion.

Operating profit rose to $21.2 billion, up from $13.2 billion in 2023. Profit also improved in the North America segment, which grew from $6.5 billion to $9.3 billion, and in the International segment, which posted an operating profit of $1.3 billion, up from a loss of $0.4 billion in 2023. The AWS segment reported an operating profit of $10.6 billion, up from $7.2 billion last year. Net income rose to $20 billion, or $1.86 per diluted share, up from $10.6 billion, or $1.00 per diluted share, in the fourth quarter of 2023.

For the full year 2024, net sales grew 11% to $638 billion, compared to $574.8 billion in 2023. Excluding the unfavorable impact of changes in foreign exchange rates, sales grew 11%. Revenue in the North America segment grew 10%, while the International segment posted a 9% increase, up 10% after adjusting for exchange rates. AWS revenue grew 19% to $107.6 billion. Operating profit rose to $68.6 billion, up from $36.9 billion in 2023.

In the North America segment, operating profit rose to $25 billion, up from $14.9 billion in 2023. The International segment posted an operating profit of $3.8 billion, up from a loss of $2.7 billion in 2023. The AWS segment reported operating profit of $39.8 billion, up from $24.6 billion in 2023. Net income rose to $59.2 billion, or $5.53 per diluted share, up from $30.4 billion, or $2.90 per diluted share, in 2023.

Amazon also reported a 36% increase in operating cash flow, which reached $115.9 billion in the trailing twelve months, up from $84.9 billion in 2023. Free cash flow rose to $38.2 billion, up from $36.8 billion in the same period last year. In addition to the financial results, the company said it achieved record success during the holiday shopping season, citing innovations that include the new Trainium2 artificial intelligence chip, Amazon Nova and improvements in AWS services. Other highlights include a record number of viewers watching the movie Red One on Prime Video and an increase in Kindle device sales.

For the first quarter of 2025, the company expects revenue growth between 5% and 9%, with quarterly sales expected to reach between $151 billion and $155.5 billion. Operating profit is expected to be between $14 billion and $18 billion.

Outlook for the next quarter

The company expects revenue between $151.5 billion and $155 billion, below analysts' estimates of $158 billion. This is primarily due to the strong impact of foreign exchange, which management believes will result in a loss of USD 2.1 billion, which should reduce revenue growth by at least 150 basis points.

Another concern was the outlook for operating profit, which was set at a wide range between US$14 billion and US$18 billion, with the midpoint of US$16 billion only a billion higher than last year. Investors see this as a sign that Amazon's growth is slowing. In 2023, fourth-quarter operating profit grew 60% year-over-year, but first-quarter growth is only expected to be less than 7%.

Amazon also expects revenue in its AWS cloud services segment to grow 19% year-over-year, with AWS revenue reaching $28.8 billion. While revenue in this segment continues to grow, the outlook for the next quarter suggests that growth will be slower than in previous periods.

News - Flash News

1. Amazon Web Services (AWS), a subsidiary of Amazon.com, Inc. introduced Amazon GameLift Streams, a new feature designed to provide developers with a fully managed service for streaming games. The announcement comes at a time when Amazon, currently worth $2.15 trillion, continues to leverage its strong financial position.

Amazon GameLift Streams eliminates the need for developers to invest in streaming infrastructure or significantly modify their games for streaming purposes. The service supports 1080p and 60 frames per second streaming and is accessible from any WebRTC-enabled browser. This feature is aimed at enabling developers to quickly reach a wider audience and increase engagement and sales.

2. Pearson, a global leader in lifelong learning, and Amazon Web Services (AWS), the cloud division of Amazon, today announced an expansion of their long-standing collaboration to accelerate the delivery of AI-powered learning to millions of people around the world and improve the user experience of Pearson products and services.

This partnership brings together two respected and leading technology and education companies. As AI transforms education and the job market, improving people's ability to learn is essential for an adaptive workforce ready for continuous upskilling, career changes and personal career fulfilment. According to recent Pearson research, ineffective career transitions and learning gaps cost the U.S. economy $1.1 trillion annually. The goal of this collaboration is to advance technology-driven education, making it more efficient, accessible and affordable. Under the 13-year collaboration, AWS will continue to provide strategic AI and cloud infrastructure for Pearson, enabling the company to enhance and expand its products and services, particularly in higher education.

Investment

- Amazon Web Services, will invest approximately $8.2 billion in the western Indian state of Maharashtra over the next few years, the Ministry of Information Technology said on Monday.

- Amazon said it plans to invest $1 billion in Marysville by 2030, bringing cloud infrastructure and strengthening Ohio's position as a growing tech hub.

- Amazon will open a new last-mile distribution center in Tarboro, North Carolina, and a same-day delivery facility in Kannapolis, as well as three additional distribution centers in Jacksonville, Mount Airy and Southern Pines. These new investments will help improve the speed of delivery for customers, support local economic growth and contribute to the more than 24,000 full- and part-time jobs Amazon has created in North Carolina and $12 billion in investments since 2010.

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