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Amazon (AMZN) released its fourth-quarter earnings after the bell on Thursday, posting impressive results that exceeded analysts’ expectations for both revenue and earnings. However, the tech giant’s first-quarter revenue guidance fell short of Wall Street projections, sending its stock down by more than 3% in after-hours trading.

Strong Q4 Results: Earnings and Revenue Beat Expectations

For the fourth quarter of 2024, Amazon reported earnings per share (EPS) of $1.86, surpassing the consensus estimate of $1.50. The company also posted quarterly revenue of $187.7 billion, exceeding analyst expectations of $187.3 billion. This marks a significant improvement from the same period last year, where Amazon reported an EPS of $1.00 on revenue of $169.9 billion.

The positive earnings report was driven by Amazon’s robust performance in key areas, including its cloud division, Amazon Web Services (AWS), and strong growth in retail. AWS generated $28.7 billion in revenue for Q4, though it slightly missed the consensus estimate of $28.8 billion. Despite this minor shortfall, AWS continues to be a major revenue contributor, with its growth providing a cushion for Amazon’s overall performance.

Q1 Outlook Disappoints: Revenue Guidance Falls Short

While Amazon’s Q4 results were solid, its outlook for the first quarter of 2025 cast a shadow over the report. The company’s guidance for Q1 revenue ranged between $151 billion and $155 billion, well below the $158 billion expected by analysts. This shortfall came despite Amazon citing several factors that could affect the quarter’s performance, including an unusually large foreign exchange impact of approximately $2.1 billion.

Amazon also noted that the leap year in 2024 would add around $1.5 billion to net sales, which could provide some offset. However, investors were clearly disappointed by the weaker-than-expected revenue outlook, particularly as it came after strong earnings for Q4. As a result, Amazon’s stock fell by more than 3% in after-hours trading following the release of the earnings report.

AI Investments and Capital Expenditures on the Rise

Looking ahead to 2025, Amazon’s CEO Andy Jassy addressed the company’s future plans during the earnings call. Amazon has committed to significantly increasing its capital expenditures, projecting around $105 billion in spending for the year, with the majority allocated toward artificial intelligence (AI) and data center investments. This marks a substantial jump from the $75 billion in capital expenditures that Amazon spent in 2024.

The company is positioning itself as a leader in the AI space, especially in cloud services. With rivals like Microsoft (MSFT) and Google (GOOG, GOOGL) also making big bets on AI, Amazon is making aggressive moves to bolster its cloud infrastructure to meet growing demand.

Challenges from Competitors and Market Conditions

Amazon’s Q4 results come on the heels of disappointing earnings reports from its cloud rivals. Microsoft missed its expectations for cloud sales, reporting revenue of $40 billion compared to the $41.1 billion analysts had predicted. Similarly, Google’s cloud division also fell short, reporting $11.9 billion in revenue against the $12.1 billion that was anticipated.

Both Microsoft and Google attributed their cloud misses to the challenges of meeting the growing demand for AI services. Amazon, being the world’s largest cloud provider, faces similar pressures. As a result, the company is focusing heavily on expanding its AI and cloud capabilities, which is driving up its capital expenditures.

In addition, Amazon is now contending with competition from new AI players. Notably, China-based AI startup DeepSeek has raised concerns in the market, with its new AI models threatening to rival those of larger, more established tech companies. Despite these challenges, Amazon has already integrated DeepSeek’s AI models into its own AI services platform, enabling users to access and utilize the software as part of its cloud offerings.

Conclusion: A Mixed Outlook for Amazon

Amazon’s fourth-quarter earnings report was a mixed bag. While the company posted strong earnings that beat Wall Street’s expectations, its weak revenue guidance for the first quarter raised concerns about future growth. The anticipated $105 billion in capital expenditures reflects Amazon’s commitment to investing in AI and cloud technologies, but this heavy spending could weigh on short-term profits.

Investors will likely continue to monitor Amazon’s progress as it navigates the challenges posed by increased competition, foreign exchange headwinds, and heavy investments in emerging technologies. As the company faces these hurdles, Amazon’s ability to deliver on its ambitious plans for AI infrastructure and capitalize on the growing demand for cloud services will be key to its future performance.