- Amazon’s stock fell 3.57% to $230.12 after hours despite Q4 results beating expectations with $1.86 EPS on $187.7 billion revenue, as Q1 guidance disappointed with a projected $151-$155 billion against the expected $158 billion.
- The guidance shortfall was attributed to significant foreign exchange rate impacts, alongside a broader industry context where rivals Microsoft (MSFT) and Google (GOOG, GOOGL) underperformed in cloud sales due to AI demand exceeding capacity.
- Amazon, amidst its own substantial investments in AI infrastructure, has integrated the competitive AI model from Chinese startup DeepSeek into its services, highlighting the rapid evolution and competitive landscape of AI and cloud computing.
Amazon’s (AMZN) stock experienced a 3.57% drop to $230.12 in after-hours trading on Thursday, despite the company reporting fourth-quarter earnings that surpassed expectations on both revenue and earnings per share (EPS). The company announced an EPS of $1.86 on revenues of $187.7 billion, against the anticipated $1.50 EPS on $187.3 billion. This performance marks a significant improvement from the previous year’s $1.00 EPS on $169.9 billion in revenue. However, the positive results were overshadowed by a first-quarter guidance that fell short of Wall Street’s expectations, projecting revenue between $151 billion and $155 billion compared to the expected $158 billion. This discrepancy was attributed to an “unusually large, unfavorable impact” from foreign exchange rates, particularly affecting Amazon by $2.1 billion or 1.5%.
The backdrop to Amazon’s earnings includes the competitive landscape in cloud computing, where both Microsoft (MSFT) and Google (GOOG, GOOGL) reported disappointing cloud sales, citing insufficient capacity to meet the burgeoning demand for AI services. Amazon, as the world’s leading cloud provider, is also aggressively expanding its AI infrastructure, with CEO Andy Jassy previously announcing a massive $75 billion capital expenditure for 2024, expected to increase in 2025, to bolster its capabilities in this area. Despite these efforts, Amazon Web Services (AWS) revenue slightly missed expectations, coming in at $28.7 billion against the $28.8 billion forecast.
The market’s reaction to Amazon’s earnings was further complicated by the emergence of DeepSeek, a Chinese AI startup whose low-cost, effective AI models have stirred the industry. This development has led to a reevaluation of investment in AI technologies, especially since Amazon and Microsoft have integrated DeepSeek’s models into their services, allowing users to leverage this technology. The introduction of such competitive AI platforms from less expected quarters like DeepSeek highlights the dynamic and rapidly evolving nature of the AI and cloud services market, where innovation and cost-effectiveness can quickly disrupt established players.
This scenario underscores the challenges Amazon faces, not only from traditional rivals but also from emerging tech innovators globally, impacting investor confidence and stock performance in the short term, despite the company’s strong fundamental growth.
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