Amazon Reports Strong Q4 Earnings But Issues Disappointing Revenue Forecast

Amazon's Q4 Performance: Earnings Beat, But Weak Guidance Hurts Stock

Amazon delivered better-than-expected Q4 earnings and revenue, yet its disappointing guidance for the upcoming quarter led to a 5% drop in extended trading. The company cited foreign exchange headwinds as a major challenge.

Key Q4 Financial Highlights:

• Earnings per share (EPS): $1.86 vs. $1.49 expected (LSEG)

• Revenue: $187.79 billion vs. $187.30 billion expected (LSEG)

• Amazon Web Services (AWS): $28.8 billion (matching expectations)

• Advertising revenue: $17.3 billion vs. $17.4 billion expected

Amazon's Revenue Forecast Falls Short

Amazon expects Q1 revenue to be between $151 billion and $155.5 billion, below analyst estimates of $158.5 billion (LSEG).

• The company pointed to a $2.1 billion negative impact from foreign exchange rates.

• At the low end of the forecast, Amazon's growth rate would be the slowest on record, ranging between 5% to 9%.

Despite this, Q4 revenue still grew 10% year-over-year, reaching $170 billion compared to the same quarter last year.

Profitability and Cost-Cutting Measures Boost Net Income

CEO Andy Jassy has focused on cost-cutting, leading to:

• Over 27,000 corporate job cuts in 2022 and 2023.

• Continued layoffs in 2024 and 2025.

• Operating margin improvements to 11.3%, up from 7.8% in Q4 2023.

Cloud Business Growth Slower Than Rivals

Amazon Web Services (AWS) grew 19% YoY, outperforming its 13% growth last year. However, it still lags behind competitors:

• Microsoft Azure: 31% growth

• Google Cloud (Alphabet): 30% growth

Amazon's AI Investments and Spending Surge

Amazon is heavily investing in artificial intelligence (AI) and cloud infrastructure:

• Capital expenditures reached $27.8 billion in Q4, nearly doubling from last year.

• Plans to increase spending to $100 billion in 2025, up from $83 billion in 2024.

• Investment in data centers and Nvidia processors to enhance AI capabilities.

• New Nova AI models and Trainium chips aim to power future AI applications.

Amazon faces rising competition in AI from companies like OpenAI, Google, Microsoft, and Chinese startup DeepSeek. DeepSeek claims to have developed a rival AI model for under $6 million, raising questions about the high costs of AI development.

Amazon's Advertising Business Continues to Thrive

Amazon’s advertising revenue jumped 18% to $17.3 billion, solidifying its position as a major digital ad player, behind Google (Alphabet) and Meta (Facebook).

Stock Performance: Amazon's Shares See Mixed Results

• Amazon shares rose 44% in 2024, outperforming the Nasdaq's 29% gain.

• Shares are up 9% in 2025, but weak guidance has led to recent declines.

FAQs

1. Why did Amazon’s stock drop despite strong Q4 earnings?

Amazon's stock declined because its Q1 revenue forecast fell short of expectations, signaling slower growth ahead.

2. What is Amazon’s growth outlook for 2025?

Amazon expects 5% to 9% revenue growth in Q1 and plans to increase capital expenditures to support its AI and cloud businesses.

3. How is Amazon competing in the AI space?

Amazon is investing heavily in AI infrastructure, including Nova AI models, Trainium chips, and data centers, to compete with OpenAI, Google, and Microsoft.