Amazon stock sinks 10% after missing Q4 profit as Jassy hints at $200B in capital spending
Amazon posted record quarterly revenue and strong cloud growth in Q4 — but its stock sank more than 10% in after-hours trading Thursday after the company beat Wall Street’s profit expectations and revealed plans to spend $200 billion on capital expenditures next year.
“With such strong demand for our existing offerings and mainstream opportunities such as AI, chips, robots, and low-Earth satellites, we expect to invest approximately $200 billion in capital expenditures at Amazon by 2026, and we expect a strong long-term return on investment,” Amazon CEO Andy Jassy said in a statement.
That’s ahead of analyst expectations, and up from the $125 billion Amazon had estimated for capex by 2025.
Investors are looking closely at how much tech companies are spending on infrastructure during the AI boom. Google said this week that its capex could double this year to $185 billion, while Meta said its revenue could reach $135 billion by 2026, nearly double from last year. Microsoft’s cash flow reached $37.5 billion in its latest quarter, up 66% from a year ago.
Amazon’s total spending includes the creation of its e-commerce fulfillment network and retail stores, which means it is not directly comparable to Microsoft, Google and others.
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Amazon reported $213.4 billion in Q4 revenue, up 14% year over year and topping estimates of $211 billion. It’s the first time the company has surpassed $200 billion in revenue in a quarter.
The company recently missed expectations for earnings per share of $1.95, up from $1.86 in the year-ago period. Net income was $21.2 billion, up from $20 billion last year.
Amazon Web Services, the company’s much-watched cloud computing division, reported $35.6 billion in Q4 sales, up 24% year over year — the fastest growth rate in three years. That tops analyst estimates by 21%.
Amazon’s online retail sales grew 10% to $83 billion in the holiday quarter, above estimates of $82.1 billion. The company continues to face competition from Walmart, which is increasing its e-commerce sales and recently acquired a market capitalization of $1 trillion.
Amazon’s market cap is estimated at $2.4 trillion. Its stock has fallen slightly over the past 12 months.
The company will hold its call with analysts at 2 pm PT. We will listen to any comments related to the company’s 16,000 job cuts announced last week.
Here are more details from Amazon’s fourth quarter earnings report:
Advertising:The company’s ad business generated $21.3 billion in revenue for the quarter, up 23% from the year-ago period. Marketing, along with AWS, is a huge profit engine.
Third-party vendor services:Revenue from third-party vendor services increased 11% to $52.8 billion.
Shipping costs:Amazon spent $31.5 billion on shipping in Q4, up 10%.
Butchers:The division, which includes Whole Foods and other Amazon grocers, posted revenue of $5.8 billion, up 5%. Amazon announced last week that it is closing all Amazon Go and Amazon Fresh locations, a total of 72 stores nationwide, focusing its efforts instead on its Whole Foods Market locations and Amazon.com grocery delivery.
Head count:Amazon employed 1.58 million people, up 1% year over year, and down slightly from Q3. That figure does not include seasonal and contract workers, and does not reflect recent job cuts, which occurred after the end of the quarter.
Main:Subscription services revenue, which includes core memberships, came in at $13.1 billion, up 14%.
Direction:The company predicts Q1 sales between $173.5 billion and $178.5 billion. Operating income is expected to be between $16.5 billion and $21.5 billion, compared to $18.4 billion in the year-ago quarter.
