Economic Insights: Company Performance Review
Amazon.com has revised its profit expectations for the upcoming quarter, indicating a continued commitment to escalating investments in artificial intelligence services.
The company projects an operating income between $14 billion and $18 billion for the quarter ending in March, falling short of analysts’ expectations, which average $18.2 billion according to gathered data.
Sales in the first quarter are anticipated to reach $155.5 billion, which is below the previous estimate of $158.6 billion.
CEO Andy Jassy is focusing on cost reduction initiatives and strengthening the core business areas, including e-commerce, cloud computing, and advertising.
In a strategic shift, Amazon is positioning itself as a key player in the artificial intelligence sector, with significant investments aimed at local data centers and advanced chips designed to enhance its capabilities and compete effectively with Nvidia.
Following these announcements, Amazon’s stock saw a decline of 3.5% in after-hours trading, closing at $238.82. Despite this dip, the stock has seen an impressive year-to-date increase of 8.9%, building on a remarkable 44% rise in 2024.
Market Observations
While the overall performance for the quarter has been positive, Jill Louor, an analyst at Da Davidson & Co, noted, “Investor concern is primarily tied to first-quarter guidance, which has fallen short of expectations primarily due to significant currency fluctuations and the impact of a leap year.” The additional day in the 2024 quarter was estimated to contribute approximately $1.5 billion to sales.
Amazon Web Services (AWS) reported a 19% revenue increase to $28.8 billion for the quarter ending December 31, consistent with analysts’ projections.
This marks the third consecutive quarter of 19% growth for AWS, with operating income for the unit reaching $10.6 billion, surpassing the anticipated $10.1 billion.
In related developments, competitors in the cloud computing space, Alphabet and Microsoft, have announced less favorable quarterly results. Alphabet’s stock experienced a sharp decline following sales figures that did not meet expectations. Meanwhile, Microsoft highlighted challenges in cloud growth due to inadequate data center capacity to meet the rising demand for artificial intelligence products.
“AWS’s growth, while steady, hasn’t exceeded expectations and is reflective of the challenges currently faced by other cloud providers like Google and Microsoft,” stated Sky Canavis, an analyst at E Marketer.
Amazon’s total investments in property and equipment amounted to approximately $83 billion in 2024, with a substantial portion allocated towards its artificial intelligence initiatives. The company reported $27.8 billion in capital expenditures in the fourth quarter, significantly higher than the anticipated $22.3 billion.
The company’s quarterly revenue grew by 10% to $187.8 billion, while net operational profit reached $21.2 billion, exceeding the estimate of $18.8 billion.
Total operating expenses rose by 6.2% to $166.6 billion, marking the eighth consecutive quarter in which Amazon’s revenue has outpaced expenses.
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