Amazon loses 3% after earnings report 📉 Guidance and AWS disappoints Wall Street

Amazon closed Q4 2024 with revenue of $187.8 billion, reflecting a 10% year-over-year increase, slightly surpassing analysts' estimates of $187.3 billion. Net income nearly doubled to $20 billion, while earnings per share (EPS) reached $1.86, significantly exceeding the forecasted $1.49.

• The strong quarter was primarily driven by a successful holiday shopping season. Amazon once again attracted consumers with early promotions in October, while key sales days like Black Friday and Cyber Monday delivered record-breaking revenue. Online sales increased by 7% YoY, reaching $75.5 billion, outperforming analyst expectations.

• Amazon Web Services (AWS), the company's most profitable segment, saw revenue increase by nearly 19% to $28.8 billion, compared to 19% YoY growth in Q3 2024. Although AWS maintained solid growth momentum, it narrowly missed market expectations of $28.87 billion. AWS now accounts for 15% of Amazon’s total revenue. However, AWS operating income surged 48% YoY to $10.63 billion, surpassing the estimated $10.45 billion, demonstrating the segment’s growing profitability.

Despite these results, investors reacted negatively to Amazon’s Q1 2025 guidance. The company expects revenue to range between $151 billion and $155.5 billion, while analysts had anticipated $158.6 billion. This translates to an expected 20% sequential decline in sales compared to the holiday quarter. Amazon pointed to adverse foreign exchange rates, which could negatively impact revenue by $2.1 billion. Following the guidance announcement, Amazon shares initially experienced double-digit losses in after-hours trading but later stabilized, down around 3%, reducing the company's market capitalization by approximately $85 billion.

Amazon earnings report and estimates. Source: FactSet

The cloud computing market remains a key investment area for major tech companies. However, Q4 2024 saw slowing growth across the cloud divisions of Amazon, Microsoft, and Alphabet (Google). While Amazon continues expanding its AI and machine learning capabilities—including investments in the Trainium2 AI chip—rising capital expenditures could pressure margins in the future.

• Amazon’s advertising segment, which is becoming an increasingly significant revenue driver, grew 18% YoY to $17.3 billion, demonstrating the platform's growing appeal for brands looking to reach e-commerce users.Additionally, Amazon improved its international market performance, with sales rising 8% to $43.4 billion. The segment transitioned from a loss in the previous year to a $1.3 billion operating profit in Q4 2024, highlighting the effectiveness of Amazon’s global expansion strategies.

• In 2024, Amazon set a new record for delivery speed, shipping 9 billion packages within one or two days. However, one of the key challenges Amazon faces in 2025 will be rising capital expenditures. Big Tech companies—including Amazon, Microsoft, Alphabet, and Meta—plan to invest around $230 billion in AI and cloud infrastructure, which could impact operating margins across the sector.

On the retail side, Amazon continues to face competition from Chinese e-commerce platforms such as Shein and Temu. In response, Amazon launched its Haul platform in November 2024, offering lower prices to counter the growing presence of budget-friendly retailers.

Amazon (AMZN.US.US) chart (D1) 

Tomorrow, Amazon’s stock price may test the EMA50 level (orange line) around $226 per share at market open. However, the final market reaction may take longer to materialize. While the company slightly exceeded revenue expectations and AWS fell short of forecasts, it showcased significant profitability improvements, which may support longer-term investor sentiment.

Source: xStation5