Amazon's Q4 Earnings Reports: Strong Performance Meets Cautious Future

Amazon recently released its fourth-quarter earnings report, showcasing impressive results that exceeded analysts' expectations. However, the company's cautious outlook for the upcoming quarter has raised concerns among investors, leading to a notable drop in its stock price.

Key Takeaways

• Amazon reported Q4 earnings per share (EPS) of $1.86, surpassing expectations of $1.50.

• Revenue for the quarter reached $187.8 billion, beating the forecast of $187.3 billion.

• The company anticipates Q1 revenue between $151 billion and $155.5 billion, falling short of the expected $158 billion.

• Amazon Web Services (AWS) generated $28.79 billion in revenue, slightly below the anticipated $28.82 billion.

• The stock fell over 5% in after-hours trading following the earnings announcement.

Strong Q4 Results

In the fourth quarter, Amazon's performance was bolstered by a successful holiday shopping season. The company reported a 10% year-over-year increase in revenue, driven primarily by its North American segment, which generated $115.6 billion. This segment's operating margin improved significantly, rising to 8% from 5.9% in the previous quarter.

The breakdown of Amazon's Q4 revenue is as follows:

• Online Stores: $75.56 billion (up 7.1% year-over-year)

• Physical Stores: $5.58 billion (up 8.3% year-over-year)

• Third-Party Seller Services: $47.49 billion (up 9% year-over-year)

• Subscription Services: $11.51 billion (up 9.7% year-over-year)

• AWS: $28.79 billion (up 19% year-over-year)

Cautious Outlook for Q1

Despite the strong performance in Q4, Amazon's guidance for the first quarter of 2025 has raised eyebrows. The company expects revenue to fall between $151 billion and $155.5 billion, which is significantly lower than Wall Street's expectations of $158 billion. This cautious outlook is attributed to several factors, including:

• An unfavorable impact of approximately $2.1 billion from foreign exchange rates.

• The leap year in 2024, which added $1.5 billion to net sales.

Investment in AI and Infrastructure

During the earnings call, CEO Andy Jassy emphasized Amazon's commitment to investing in artificial intelligence (AI) and infrastructure. The company plans to spend over $100 billion in capital expenditures in 2025, primarily focused on enhancing its AI capabilities and expanding its data centers. This investment is crucial as Amazon competes with other tech giants like Microsoft and Google, which have also faced challenges in meeting cloud service demands.

Market Reaction

Following the earnings report, Amazon's stock experienced a significant decline, dropping more than 5% in after-hours trading. Investors reacted negatively to the company's lower-than-expected revenue guidance, despite the strong Q4 results. The stock had previously gained about 8% year-to-date, reflecting optimism ahead of the earnings announcement.

In summary, while Amazon's fourth-quarter results demonstrate robust growth and resilience, the cautious outlook for the first quarter has left investors wary. The company's ongoing investments in AI and infrastructure will be critical as it navigates a competitive landscape and seeks to maintain its leadership position in the e-commerce and cloud sectors.

Sources

• Amazon stock falls after first quarter sales outlook disappoints, Yahoo Finance.

• Amazon Q4 2024 earnings: What Wall Street expects, Quartz.

• Amazon reports better Q4 results, but soft revenue guidance weighs on stock By Investing.com, Investing.com.

• Amazon earnings recap: Stock falls as guidance falls short, CFO indicates capex of more than $100 billion in 2025, Business Insider.

• Amazon Stock Falls. Q4 Earnings Beat But Guidance Disappoints., Investor's Business Daily.