LDN - Business

Amazon reports strong earnings for Q4, but stocks dip due to outlook for the first quarter

[February 07, 2025] By HALELUYA HADERO

Amazon on Thursday reported better-than-expected revenue and profits for the holiday shopping period, but its stocks dipped in after-hours trading due to disappointing guidance for the current quarter.

The Seattle-based e-commerce and technology company said its revenue for the October-December period totaled $187.8 billion, a 10% jump compared with the same period in 2023. Profits came out to $20 billion while earnings per share reached $1.86, higher than the $1.49 that analysts surveyed by FactSet had anticipated.

But the company said it expected revenue for the current quarter to be between $151 billion and 155.5 billion, lower than the $158.56 billion that analysts were expecting. The guidance anticipates “an unusually large, unfavorable impact” from foreign exchange rates, it said.

Amazon is the biggest online shopping destination in the U.S. and has long been a beneficiary of consumer spending during the holidays. As it has done in recent years, the company in October began offering promotions intended to lure early holiday shoppers. It advertised other discounts during the three-month period, including on major sales days such as Black Friday and Cyber Monday.

Amazon on Thursday reported it saw $75.5 billion in revenue for its online shopping business, up 7% from the same period in 2023.

Across the retail industry, holiday sales in November and December were better than expected compared with the previous year as lower inflation on holiday goods enticed shoppers to buy, according to The National Retail Federation. Online shopping also saw record sales levels, Adobe Analytics reported in January.

Sales for Amazon Web services, the company’s prominent cloud computing unit, rose 19% during the fourth quarter. But it fell slightly below analysts expectations.

Amazon is one of the biggest players in the competitive tech race around generative artificial intelligence. Like other tech companies, it has ramped up investments in the technology and is spending billions to expand data centers that support AI and cloud computing. The company is also spending money on other equipment, including its own computer chips and those developed by Nvidia. It has also rolled out its own AI models and integrated the generative AI into other parts of its business.

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An Amazon truck drives in in Philadelphia, Friday, April 30, 2021. (AP Photo/Matt Rourke, file)

In the fourth quarter, Amazon reported spending $27.8 billion on property and equipment, significantly higher than the same period in 2023. During a call with analysts on Thursday, Amazon CEO Andy Jassy said capital expenditures for the quarter came out to $26.3 billion, most of which was geared towards AI and AWS.

“We think virtually every application that we know of today is going to be re-invented with AI inside of it,” Jassy said. “I think both our business, our customers and shareholders will be happy medium-to-long term that we're pursuing the capital opportunity and the business opportunity in AI.”

Jassy added during the call that Amazon, like many others, was “impressed” by DeepSeek, the Chinese artificial intelligence company whose chatbot recently became the most downloaded app in the U.S.

Amazon's quarterly report comes as the retail industry is absorbing a new 10% tariff President Donald Trump imposed on Chinese imports on Tuesday. Tariffs on Canada and Mexico have been put on hold for about a month.

Trump also threw out a trade exemption that allowed low-value shipments from China to bypass duties, a loophole that had given an advantage to China-founded e-commerce firms, such as Shein and Temu.

The new tariffs could benefit Amazon by increasing costs for its competitors. But it would also impact Chinese sellers who connect with American consumers on the company’s shopping platform. Furthermore, it could raise prices on a recently-launched online storefront that Amazon set up to ship low-cost products directly from China. The storefront, called Amazon Haul, was Amazon’s answer to Shein and Temu.

Additionally, analysts from Morgan Stanley wrote in a Monday note that Amazon's first-party retail business, though which the company sells products purchased from manufacturers, has the highest exposure to the tariffs. The analysts estimate 25% of the merchandise sold through that business comes from China.

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