AMAZON.COM projected profit in the current quarter that fell short of analysts’ estimates, suggesting the company continues to ramp up spending to support artificial intelligence (AI) services.
Operating income will be US$14 billion to US$18 billion in the period ending in March, the company said on Thursday (Feb 6). Analysts, on average, projected US$18.2 billion, according to data compiled by Bloomberg. First-quarter sales will be as much as US$155.5 billion, compared with an average estimate of US$158.6 billion.
Chief executive officer Andy Jassy has been cutting costs and focusing the company on three business pillars: e-commerce, cloud computing and advertising. Determined to become a supermarket for AI products and services, he’s ploughing billions of US dollars into data centres and homegrown chips capable of handling AI tasks and taking on market leader Nvidia.
Amazon shares declined about 1 per cent in extended trading after closing at US$238.83 in New York. The stock has gained 8.9 per cent so far this year after a 44 per cent jump in 2024.
While Amazon’s overall quarter was generally positive, “investors immediate concerns are around Q1 guidance, which was below expectations, mostly because of the impact of a big currency drag and the impact of lapping a leap year”, said Gil Luria, an analyst at DA Davidson & Co The company said the extra day in the quarter in 2024 boosted sales by about US$1.5 billion.
Amazon Web Services (AWS) revenue jumped 19 per cent to US$28.8 billion in the quarter ended Dec 31, in line with analysts’ estimates. It was the third straight quarter of 19 per cent growth for the cloud unit. Operating income generated by the unit was US$10.6 billion, exceeding the average projection of US$10.1 billion.
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The Seattle-based company’s two main cloud rivals both reported lacklustre quarterly results. Alphabet’s shares fell sharply on Tuesday after the company said sales missed estimates. Last week, Microsoft said its own cloud sales growth was hurt because it did not have enough data centres to handle demand for its AI products.
“AWS growth did not accelerate as anticipated and instead matched Q3 levels, indicating that the company is challenged by the same types of capacity constraints facing rivals Google and Microsoft,” said Sky Canaves, an analyst at Emarketer.
Amazon purchases of property and equipment totalled about US$83 billion in 2024, with much of that spending on the AI race. The company spent US$27.8 billion on property and equipment in the fourth quarter, well above analysts’ expectations of US$22.3 billion in such expenses.
Quarterly revenue increased 10 per cent to US$187.8 billion. Operating profit was US$21.2 billion, compared with the average estimate of US$18.8 billion.
Total operating expenses rose 6.2 per cent to US$166.6 billion – marking the eighth consecutive quarter that Amazon’s revenue increased at a higher rate than costs. BLOOMBERG
