• Amazon reported better-than-expected Q4 earnings and revenue
• Amazon’s cloud unit AWS reports weaker-than-expected revenue growth
• Data centre sales nearly doubled in 2024, but still fell short of estimates
• Q1 guidance disappoints amid foreign exchange headwinds

Amazon.com, Inc. reported robust financial results for the fourth quarter of 2024, exceeding market expectations in both earnings and revenue. However, the company provided lower-than-anticipated guidance for the first quarter of 2025, citing foreign exchange headwinds and broader economic uncertainties.

Key Financial Highlights

Earnings per share (EPS): $1.86 vs. $1.49 expected (LSEG).

Revenue: $187.79 billion vs. $187.30 billion expected (LSEG).

Operating income: $21.2 billion, up from $13.2 billion in Q4 2023.

Net income: Nearly doubled to $20 billion from $10.6 billion in Q4 2023.

Annual net sales: Increased 11% to $638.0 billion from $574.8 billion in 2023.

Foreign exchange impact: A negative impact of $0.9 billion in Q4 and $2.3 billion for the full year.

Amazon’s revenue growth of 10% in Q4 2024 was supported by strong performances across its retail, cloud computing, and advertising segments. However, concerns remain over decelerating growth in Amazon Web Services (AWS) and increased capital expenditures, which may impact profitability in the long term. ¹

Q1 Forward Guidance

Amazon provided a conservative outlook for the first quarter of 2025:

Projected revenue: Between $151 billion and $155.5 billion (vs. $158.5 billion consensus estimate), reflecting a 5%-9% year-over-year increase.

Foreign exchange impact: Expected to reduce revenue by $2.1 billion (1.5%).

Operating income forecast: $14 billion to $18 billion, below analysts’ expectations of $18.35 billion.

Leap Year impact: The extra day in Q1 2024 contributed approximately $1.5 billion in additional revenue, making year-over-year comparisons more challenging.

Segment Analysis

Amazon Web Services: Revenue rose 19% to $28.8 billion, slightly below consensus estimates of $28.87 billion. While AWS remains a critical growth driver, the segment’s performance has lagged behind Microsoft Azure (31% growth) ² and Alphabet’s Google Cloud (30% growth) ³. Supply chain constraints and delays in obtaining AI-optimized chips from external suppliers contributed to the slower-than-expected expansion. CEO Andy Jassy acknowledged that AWS growth could have been stronger if supply chain bottlenecks had not hindered capacity expansion.

Advertising: Revenue increased 18% to $17.3 billion, just shy of the $17.4 billion estimate. Amazon continues to cement its position as a dominant digital advertising platform, benefiting from increased marketing spend by brands seeking prominent placements on Amazon’s marketplace.

Retail Business: Online sales grew 7% to $75.56 billion, surpassing expectations of $74.55 billion. The continued success of Amazon Prime and strong holiday season sales were key contributors to this growth. Additionally, investments in logistics and delivery infrastructure have helped enhance the customer experience, leading to higher order volumes.

Source: TradingView

Amazon Faces Cloud Growth Constraints but Bets Big on AI

Amazon CFO Brian Olsavsky noted that capital expenditures would increase in 2025 to approximately $100 billion, up from $83 billion in 2024. This expansion will primarily support AWS infrastructure, artificial intelligence (AI) initiatives, and logistics enhancements. Amazon is investing heavily in AI-driven innovations, including the development of proprietary AI models such as Nova and its homegrown Trainium chips.

While this aggressive spending may raise concerns about short-term earnings, CEO Andy Jassy remains optimistic, viewing AI as a transformative opportunity that justifies the investment. He believes this surge in spending is a strong indicator of long-term growth, particularly as AI integration becomes central in many industries.

Jassy predicts that AWS capacity constraints, which contributed to slower cloud revenue growth in Q4 2024, will ease by late 2025, positioning the company for stronger expansion. He also emphasized that Amazon only ramps up investments when there is clear evidence of rising demand, reinforcing confidence in the company’s strategic direction.

Despite concerns over a potential slowdown, Amazon’s projected Q1 2025 net sales of $151 billion to $155.5 billion could mark its lowest-ever year-over-year quarterly revenue growth. Jassy urged investors to look beyond a single quarter and focus on the bigger picture. He reiterated that AI represents the biggest technological advancement since the internet, with AI-powered applications set to revolutionize businesses globally.

As Big Tech ramps up AI-related investments, cloud computing growth remains sluggish across the industry. Major players like Microsoft, Amazon, and Google-parent Alphabet have all reported underwhelming cloud revenue figures.

Amazon’s aggressive AI investments surpass those of competitors like Microsoft, which plans to spend $80 billion, and Alphabet, with an estimated $75 billion in capital expenditures. This level of investment underscores Amazon’s determination to maintain leadership in the AI and cloud sector.

Conclusion

Amazon’s fourth-quarter earnings demonstrated strong profitability and revenue growth, bolstered by its diversified business segments. However, its cautious guidance for 2025, coupled with challenges in the cloud computing sector and AI-related expenditures, raises questions about future growth prospects. As Amazon navigates competitive pressures and macroeconomic headwinds, its ability to capitalize on AI advancements and cloud expansion will be critical in sustaining long-term investor confidence.

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1. Amazon Investor Relations: https://ir.aboutamazon.com/news-release/news-release-details/2025/Amazon.com-Announces-Fourth-Quarter-Results/
2. Microsoft Earnings Release FY 24 Q4: Intelligent Cloud: https://www.microsoft.com/en-us/investor/earnings/fy-2024-q4/intelligent-cloud-performance
3. Alphabet Investor Relations: https://abc.xyz/assets/a3/91/6d1950c148fa84c7d699abe05284/2024q4-alphabet-earnings-release.pdf