Amazon’s Q4 Earnings Beat Expectations But Guidance Disappoints

SEATTLE, Feb. 06, 2025 — Amazon (NASDAQ: AMZN) posted stronger-than-expected earnings for the fourth quarter, surpassing Wall Street estimates on both revenue and profit. However, the e-commerce giant’s first-quarter guidance fell short of analyst expectations, causing the stock to slip in after-hours trading.

Amazon’s Q4 Performance: Surpassing Expectations

Amazon reported fourth-quarter revenue of $187.79 billion, slightly above the expected $187.30 billion, as per LSEG data. Net income surged nearly 90% year-over-year, reaching $20 billion, or $1.86 per share, exceeding the anticipated $1.49 per share. The company’s ability to control costs and strengthen its high-margin cloud computing and advertising businesses contributed significantly to the profit boost.

As per Amazon’s report, revenue climbed 10% from the previous year’s fourth quarter, when it stood at $170 billion. Amazon CEO Andy Jassy credited the growth to disciplined cost management and investments in artificial intelligence.

Amazon Web Services (AWS) and Advertising: Mixed Results

Amazon Web Services (AWS), a key profit driver, reported revenue of $28.8 billion, aligning with analyst expectations, according to StreetAccount. While AWS revenue grew 19% year-over-year, its growth still lags behind Microsoft Azure (31%) and Alphabet’s Google Cloud (30%).

Amazon’s advertising segment also showed strong performance, generating $17.3 billion in revenue, marking an 18% increase from the previous year. However, it fell just shy of analyst projections of $17.4 billion.

Disappointing Q1 Guidance Raises Concerns

Despite the solid fourth-quarter performance, Amazon’s first-quarter guidance left investors uneasy. The company projects Q1 revenue between $151 billion and $155.5 billion, missing Wall Street’s expectation of $158.5 billion, per LSEG data.

Amazon attributed this shortfall to an unfavorable foreign exchange impact of $2.1 billion, equivalent to a 1.5% hit. Additionally, the company noted that the 2024 leap year had boosted Q4 sales by $1.5 billion, creating a tougher comparison for Q1.

“This guidance anticipates an unusually large, unfavorable impact from foreign exchange rates,” the company said in a statement.

Amazon’s Aggressive AI and Cloud Investments

Amazon is significantly increasing its capital expenditures, aiming to stay competitive in the AI race. CFO Brian Olsavsky revealed that the company plans to invest approximately $100 billion in capital expenditures in 2025, a sharp rise from $83 billion in 2024. A substantial portion of this spending will go toward AWS infrastructure and artificial intelligence capabilities.

Amazon is responding to competition from Microsoft, Google, and AI startups like Anthropic and DeepSeek. The company has poured billions into expanding data centers and acquiring cutting-edge AI chips, including Nvidia GPUs and its own custom-built Trainium chips.

“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,” said CEO Andy Jassy.

Stock Performance and Market Outlook

Amazon’s stock has performed well in recent months, rising 9% year-to-date and gaining 44% in 2024. However, the disappointing Q1 guidance led to a more than 5% drop in extended trading.

Wall Street is closely watching how Amazon navigates the evolving AI landscape and whether its aggressive investments will translate into long-term profitability. The company faces competition from Microsoft, Google, and emerging AI players challenging traditional assumptions about the cost of AI model development.

Despite near-term guidance concerns, Amazon’s strong cloud and advertising segments, coupled with its strategic investments in AI, could drive long-term growth. Investors will be monitoring the company’s upcoming earnings calls for further insights into its roadmap for 2025.