Amazon reported better-than-expected fourth-quarter earnings but issued a cautious outlook that disappointed investors, driving its shares down more than 4% in after-hours trading. The weaker guidance has raised concerns about a slowdown in the booming artificial intelligence (AI) sector and potential foreign exchange impacts.
Despite the company surpassing analysts’ earnings estimates, Amazon forecasted revenue between $151 billion and $155.5 billion, well below the $158.5 billion expected. The company attributed this to a $2.1 billion unfavorable impact from foreign exchange fluctuations. Additionally, Amazon projected operating income between $14 billion and $18 billion, also falling short of the $18.2 billion forecasted by analysts.
Amazon’s soft outlook echoes similar concerns raised by other US tech giants like Alphabet, Microsoft, and Meta, indicating potential hurdles in the AI industry due to heavy investments in data centers to meet surging demand. This sentiment was further amplified by DeepSeek, a Chinese AI startup, which raised questions about the valuation hype surrounding top US tech firms.
In addition to foreign exchange challenges, Amazon is facing rising costs associated with its aggressive expansion of data centers. Capital expenditure in the December quarter soared to $27.8 billion, a 90% increase from the previous year.
However, the company’s revenue rose 10% year on year to $187.8 billion, surpassing estimates. Excluding the foreign exchange impact, revenue grew by 11%. Amazon’s net income also saw a significant increase of 189% year on year, reaching $20 billion, driven by cost-cutting measures, including staff reductions.
Amazon Web Services (AWS), the company’s cloud computing division, continued its strong performance, maintaining a 19% annual growth rate for the third consecutive quarter, in line with analyst expectations. Despite the strong earnings, the subdued outlook has raised concerns among investors about the future growth of Amazon and the broader tech industry.
