Amazon Reports Strong Q4 Results, but Guidance Falls Short of Expectations
Amazon’s AMZN recent Q4 results generated significant interest as the company indicated a record holiday shopping season.
Despite beating Q4 sales and earnings estimates, Amazon’s cautious future outlook disappointed some investors. Here’s a closer look at what this means for Amazon stock—should you buy, sell, or hold?
Highlights of Amazon’s Q4 Performance
In Q4, Amazon’s revenue increased by 10% year-over-year, reaching $187.79 billion, surpassing analyst estimates of $187.27 billion. Leading in cloud services, Amazon Web Services (AWS) contributed $28.78 billion, representing 16% of Amazon’s total sales. Although AWS grew from $24.2 billion in the previous year, it slightly missed estimates of $28.83 billion.
Net income jumped from $10.6 billion to $20 billion or $1.86 per share, marking an impressive 84% increase from last year’s EPS of $1.01. This marked the ninth consecutive quarter where Amazon surpassed earnings expectations. In fact, that record includes topping sales estimates in three of the past four quarterly reports.
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Reviewing Amazon’s Annual Results
For the full year of 2024, Amazon’s total sales increased by 11% to $637.96 billion compared to $574.78 billion in 2023. Annual earnings soared 95% to $5.53 per share from $2.84 in 2023, illustrating strong overall financial health.
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Concerns Over Amazon’s Future Guidance
Looking ahead, Amazon projected Q1 revenue between $151 billion and $155.5 billion, falling short of many analysts’ expectations of $158 billion. The Zacks Consensus has also been revised down to $154.86 billion, reflecting an 8% growth forecast.
The company’s revised guidance is partly due to unfavorable foreign exchange rates, anticipating a $2.1 billion hit linked to the strong U.S. dollar.
Additionally, analysts are wary of increasing expenses, as Amazon plans a significant investment in AI data centers, with spending expected to rise to $100 billion this year, compared to $83 billion in 2024. While this aligns with industry trends, it raises questions about short-term profitability.
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Financial Stability Despite Increased Expenditure
Investors may find reassurance in Amazon’s robust balance sheet. Currently, the company holds $101.2 billion in cash and equivalents and has total assets of $624.89 billion, significantly higher than its total liabilities of $338.92 billion.
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Final Thoughts
Currently, Amazon stock holds a Zacks Rank #3 (Hold). While the company remains profitable, its investment in AI infrastructure could pay off in the future. Investors may want to wait for a more favorable buying opportunity.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
