The shares of e-commerce giant Amazon Inc. AMZN declined 2.65% in pre-market trading on Friday following the company's fourth-quarter earnings release on Feb. 6 after the market close.
What Happened: Amazon’s fourth-quarter revenue increased 10% year-over-year, hitting $170 billion. The net income almost doubled to $20 billion ($1.86 per share) from $10.6 billion ($1 per share) reported the year before. Since late 2022, CEO Andy Jassy has led a cost-cutting strategy, which led to the layoff of more than 27,000 corporate employees in 2022 and 2023.
Despite these strong results, Amazon’s guidance for the first quarter of 2025 fell short of Wall Street’s expectations. The company anticipates sales this quarter to range from $151 billion to $155.5 billion, while analysts predicted $158.5 billion. Amazon attributed this guidance to an “unusually large, unfavorable impact” from foreign exchange rates.
Amazon’s cloud division sales slightly missed consensus estimates but outpaced the same quarter last year. The company’s capital expenditures hit $27.8 billion during the quarter, a significant increase from $14.6 billion a year ago, as it continues to invest heavily in AI technology to stay competitive.
The e-commerce giant plans to invest nearly $100 billion in AI initiatives this year, surpassing competitors like Microsoft Inc. MSFT and Alphabet Inc. GOOG GOOGL.
SEE ALSO: Google Joins Meta, Amazon In Winding Up DEI Hiring — Memo Reveals Details
Why It Matters: The Jeff Bezos-founded company warned that its cloud computing division may encounter capacity limitations, even as it plans to a massive AI investment. Amazon’s President and CEO Andy Jassy cautioned that growth would be "lumpy" and indicated that the company might encounter capacity challenges due to hardware delays and insufficient electricity supply.
"It is true we could be growing faster were it not for some of the constraints on capacity," stated Jassy.
Jassy added that the availability of chips — both from third-party suppliers and Amazon's in-house chip design team — along with power capacity, is restricting Amazon Web Services’ ability to launch new data centers. However, he expects these limitations to ease in the second half of 2025.
Amazon shares closed 1.26% lower to close at 238.83 on Thursday, following a 44% surge in 2024.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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