Amazon Reports Strong Q4 Sales, Stock Drops on Forecast \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Amazon posted stronger-than-expected revenue and profits for the holiday shopping season, reporting $187.8 billion in sales for Q4 2024. However, shares fell in after-hours trading due to lower-than-expected revenue guidance for the current quarter. The company’s heavy investments in AI and cloud computing continue to drive growth, while new tariffs imposed by President Donald Trump could impact Amazon’s retail business and competition with Chinese e-commerce firms.
Amazon’s Q4 Earnings Report: Quick Looks
- Strong Holiday Sales: Q4 revenue hit $187.8 billion, a 10% increase year-over-year.
- Better-Than-Expected Profits: Amazon earned $20 billion in profit, with EPS of $1.86, surpassing analyst estimates.
- Stock Slips on Guidance: Q1 revenue projections of $151-$155.5 billion fell short of Wall Street expectations.
- AI & Cloud Expansion: AWS sales grew 19%, while Amazon ramped up AI investments with $27.8 billion in capital expenditures.
- Impact of Tariffs: Trump’s new 10% tariff on Chinese imports could affect Amazon’s supply chain and competition with Shein and Temu.
Deep Look
Strong Holiday Performance But Disappointing Outlook
Amazon wrapped up the 2024 holiday season with strong earnings, but a lower-than-expected revenue forecast for Q1 2025 sent its stock slipping in after-hours trading. The e-commerce giant reported $187.8 billion in revenue for the October-December quarter, a 10% increase from the same period last year. Profits soared to $20 billion, translating to earnings per share of $1.86—easily beating analyst expectations of $1.49, according to FactSet.
Despite the strong performance, Amazon issued a weaker-than-anticipated revenue projection for the first quarter of 2025, forecasting sales between $151 billion and $155.5 billion. Analysts had expected $158.56 billion. The company cited an “unusually large, unfavorable impact” from foreign exchange rates as a factor in its lower guidance.
Retail & AWS Growth Drive Earnings
As the largest online shopping platform in the U.S., Amazon capitalized on strong consumer demand during the holiday season. The company reported $75.5 billion in revenue from its online shopping business, up 7% year-over-year, as it rolled out aggressive promotions during Black Friday, Cyber Monday, and early-season sales events.
Industry-wide, holiday retail sales exceeded expectations as easing inflation encouraged spending. Adobe Analytics reported record-breaking online shopping figures, and the National Retail Federation confirmed stronger-than-expected holiday sales.
Meanwhile, Amazon Web Services (AWS), the company’s cloud computing division, posted a 19% revenue increase during Q4. However, it slightly missed analyst estimates, highlighting the challenges of competing with rivals like Microsoft Azure and Google Cloud in the increasingly competitive AI-driven cloud market.
Amazon’s AI Expansion & Heavy Capital Investments
Amazon is doubling down on artificial intelligence, making massive investments in infrastructure to support AI-driven applications and cloud services. The company reported $27.8 billion in capital expenditures for the fourth quarter, with $26.3 billion dedicated primarily to AI and AWS expansion.
“We think virtually every application that we know of today is going to be re-invented with AI inside of it,” said CEO Andy Jassy during a call with analysts.
Amazon has ramped up spending on AI-focused data centers, proprietary computer chips, and integrations of generative AI into various parts of its business. The company is developing its own AI models while also utilizing Nvidia’s chips to strengthen its cloud capabilities.
During the earnings call, Jassy also acknowledged Amazon’s interest in China-based AI company DeepSeek, which recently became the most downloaded chatbot app in the U.S.
Trump’s New Tariffs: A Double-Edged Sword for Amazon
Amazon’s earnings report comes just as the retail industry is adjusting to new trade policies under President Donald Trump. On Tuesday, Trump imposed a 10% tariff on Chinese imports while temporarily pausing tariffs on goods from Canada and Mexico.
Additionally, Trump removed a long-standing trade exemption that allowed low-value shipments from China to bypass duties. This exemption had benefited China-based e-commerce giants like Shein and Temu, both of which compete with Amazon in the low-cost, fast-fashion space.
While the new tariffs could make it more expensive for competitors like Shein and Temu to operate in the U.S., they could also have negative implications for Amazon’s retail business. The company sources a significant portion of its products from China, including through its recently launched Amazon Haul storefront, which directly ships low-cost Chinese products to American consumers.
A report from Morgan Stanley estimated that 25% of Amazon’s first-party retail business—where Amazon buys products from manufacturers and sells them directly—relies on Chinese imports. With new tariffs in place, these costs could rise, impacting product pricing and profitability.
What’s Next for Amazon?
Despite short-term challenges like foreign exchange fluctuations and tariff uncertainty, Amazon remains focused on expanding its AI and cloud computing capabilities. The company’s continued investment in artificial intelligence suggests that it views AI as a long-term growth driver, particularly in AWS.
Meanwhile, its retail business will have to navigate a changing trade landscape under Trump’s policies. With Q1 2025 revenue guidance falling below expectations, investors will be watching closely to see how Amazon manages costs and maintains its competitive edge.
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