Amazon's Q4 2024 Earnings Surpass Expectations but Stock Drops on Weak Guidance
Amazon (AMZN) reported better-than-expected earnings and revenue for the fourth quarter of 2024, but its weak guidance for the current quarter led to a decline in its stock price. The company posted earnings per share (EPS) of $1.86, surpassing Wall Street’s expectation of $1.49, while revenue reached $187.79 billion, slightly above the forecasted $187.30 billion. Despite these strong results, Amazon’s stock fell more than 5% in extended trading due to its disappointing revenue forecast for the first quarter of 2025.
The company anticipates sales between $151 billion and $155.5 billion for the current quarter, below analysts’ expectations of $158.5 billion. Amazon attributed the weak guidance to foreign exchange headwinds, which are expected to have an unfavorable impact of $2.1 billion, or 1.5%, on revenue. This would result in revenue growth of only 5% to 9%, potentially marking the slowest growth on record for the company since its IPO in 1997.
Amazon’s cloud division, Amazon Web Services (AWS), reported revenue of $28.8 billion, matching analysts’ estimates, with a 19% year-over-year growth. However, AWS continues to lag behind competitors like Microsoft Azure, which saw 31% growth in the same period. Advertising revenue also fell slightly short of expectations, coming in at $17.3 billion compared to the forecasted $17.4 billion.
The company’s net income nearly doubled to $20 billion in the fourth quarter, up from $10.6 billion a year earlier. This growth was driven by cost-cutting measures, including layoffs of over 27,000 corporate employees in 2022 and 2023, and continued strength in its high-margin cloud business. Amazon’s operating margin improved to 11.3% in the quarter, up from 7.8% in the same period last year.
Amazon has been investing heavily in artificial intelligence (AI) infrastructure, with capital expenditures totaling $27.8 billion in the fourth quarter, up from $14.6 billion a year ago. The company plans to increase spending to $100 billion in 2025, primarily to support AWS and its AI services. CEO Andy Jassy highlighted the company’s AI investments, including its new Nova AI models and Trainium chips, as key drivers of future growth.
Despite the weak guidance, Amazon’s stock has performed well over the past year, gaining 44% in 2024 and outperforming the Nasdaq, which rose 29%. Analysts remain optimistic, with a consensus Strong Buy rating and an average price target of $261.42, implying a 9.46% upside from current levels. However, the company’s ability to navigate foreign exchange challenges and maintain growth in its core businesses will be critical in the coming quarters.
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