By Angela PalumboAdam Levine
Amazon reported mixed fourth-quarter earnings results Thursday afternoon. Its shares fell in after-hours trading.
Earnings per share were up 86% to $1.86, compared to Wall Street's consensus estimate of $1.49, according to FactSet. Revenue for the quarter reached $187.8 billion, against expectations of $187.3 billion, and up 10% on the year.
Amazon's important cloud unit, AWS, saw growth of 19% to $28.8 billion, versus expectations of $28.9 billion.
Amazon's revenue outlook for the first quarter fell short of expectations at $153.3 billion at the midpoint, up 7% from 2024, versus a $158.6 billion analysts' estimate.
Amazon stock was down around 4% in after-hours trading following the release.
This is breaking news. Read a preview of Amazon's earnings below and check back for more analysis soon.
When Amazon.com reports earnings, Wall Street will be keeping a close eye on its web services business after other tech companies' cloud segments have offered disappointing results.
Amazon is scheduled to report fourth-quarter earnings after the stock market closes Thursday. Analysts surveyed by FactSet expect the e-commerce giant will post earnings of $1.49 a share, which would be an increase from the $1.00 a share in the year-ago period. Revenue for the quarter is expected to be $187.3 billion, above last year's $170 billion.
Amazon Web Services is the company's cloud computing platform, and will be the most watched segment when earnings hit. AWS not only typically brings in high operating income for Amazon, but is also where the company is pushing a lot of its generative artificial intelligence initiatives.
Wall Street expects Amazon to report AWS revenue of $28.8 billion for the quarter, an increase from last year's $24.2 billion.
Earnings results from tech peers in recent days hve put a microscope on AWS expectations. On Jan. 29, Microsoft said revenue from Azure and other cloud services increased by 31% in its latest quarter, a deceleration from a 33% increase in the previous quarter. Then on Tuesday, Google parent Alphabet reported fourth-quarter cloud revenue below Wall Street estimates.
Despite this, BofA Securities analyst Justin Post, who rates Amazon as a Buy with a $255 price target, wrote that "cloud demand likely remained robust in 4Q, and [we] anticipate strong AI demand to continue into 2025."
In trend with fellow tech giants, Amazon has been spending big on AI. Management said on the earnings call in October that the company expected capital expenditures of $75 billion in 2024, primarily to "support the growing need for technology infrastructure."
Investors will be listening in to see if Amazon provides an update on its spending plans for the current year. Meta Platforms, Microsoft, and Alphabet all laid out plans in recent days to continue spending billions of dollars on AI investments -- despite concerns from shareholders that this spending may be overkill.
The tech sector was also thrown for a loop last week: Social-media posts said that Chinese start-up DeepSeek had developed an AI model similar to ChatGPT for a lot less money than what U.S. tech companies have spent on AI. But among the uncertainty, some analysts think there could be benefits to tech companies like Amazon if DeepSeek's innovations lead to lower costs down the line.
"Over time, we believe Amazon could be one of the beneficiaries from the recent emergence of DeepSeek, as Amazon's AI platform is designed to accommodate open-source models, and a potentially lower cost of integrating AI into its products and services could be margin accretive longer term," analysts at Canaccord Genuity wrote on Jan. 30.
Wall Street will also be looking at Amazon's e-commerce sales, which bring in the most revenue for the company. Analysts expect online sales of $74.7 billion in the quarter, an increase from last year's $70.5 billion.
Even if sales beat estimates for the quarter, there's questions about how tariffs could impact Amazon's revenue guidance. President Donald Trump announced over the weekend that he'd implement 10% tariffs on China and 25% tariffs on Canada and Mexico. The White House paused the Mexican and Canadian tariffs on Monday, but the levies on China have gone into effect.
Amazon's most recent 10-K says that because China-based sellers account for significant portions of third-party seller services and advertising revenue, regulatory and trade restrictions are factors that could "adversely affect our operating results."
Amazon shares have gained 7.7% so far this year, compared with the 3% increase in the S&P 500. The stock is trading at 37.8 times earnings expected over the next 12 months.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 06, 2025 16:16 ET (21:16 GMT)
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