On February 6, Amazon.com's investors significantly lowered the company's shares following disappointing performances in the cloud computing sector and lower-than-anticipated forecasts for first-quarter revenue and profit.
After the fourth-quarter earnings report, Amazon's shares plummeted up to 5% in after-hours trading, resulting in a loss of approximately $90 billion in market value and ultimately decreasing by 4.2%.
Chief Financial Officer Brian Olsavsky indicated that Amazon plans to maintain a similar capital expenditure rate for the upcoming year as seen in the last quarter, where the company spent $26.3 billion, especially in enhancing artificial intelligence software development.
Amazon's first-quarter sales projection fell below analysts’ expectations, even considering the negative impact of $2 billion from the prior year’s Leap Day. The company's anticipated sales range of $151 billion to $155 billion did not align with the average estimate of $158 billion.
In the cloud sector, Amazon Web Services reported a revenue increase of 19% to $28.79 billion, slightly missing estimates of $28.87 billion, according to data compiled by LSEG.
CEO Andy Jassy highlighted that chip shortages have hindered some of the growth in AWS, stating, "We could be growing faster if not for some of the constraints on capacity, and they come in the form of chips from our third-party partners coming a little bit slower than before," during an investor conference call.
Investors' impatience with significant capital spending by Big Tech companies and their desire for returns on investments in AI has increased, especially after the subpar growth rates this quarter, as noted by Daniel Morgan, senior portfolio manager at Synovus Trust.
Amazon, along with its rivals Microsoft and Google parent Alphabet, is heavily investing in artificial intelligence software development. The company aims to introduce new AI software models to attract more business and consumer clientele. Additionally, Amazon plans to launch its generative artificial intelligence voice service later this month, following initial delays over quality and speed concerns.
Despite the cloud sector's challenges, Amazon's retail division excelled, seeing a 7% increase in online sales during the quarter to $75.56 billion, surpassing estimates of $74.55 billion.
For the first quarter of 2025, Amazon predicted an operating profit ranging from $14 billion to $18 billion, falling below the average analyst projection of $18.35 billion.
In the fourth quarter, Amazon reported revenue of $187.8 billion, slightly surpassing the average analyst estimate of $187.30 billion. Advertising sales also saw an 18% increase to $17.3 billion, just under the average estimate of $17.4 billion.
Net income nearly doubled to $20 billion from $10.6 billion a year before. Earnings per share amounted to $1.86, exceeding the expected $1.49 per share.