On February 6, local time, Amazon released its fourth-quarter earnings report for 2024, revealing impressive numbers that exceeded market expectationsThe company's revenue for the quarter reached a staggering $187.79 billion, marking a 10% year-on-year growth, while net profit surged by 88% to $20 billionThis remarkable performance solidifies Amazon’s position as a dominant player in the e-commerce and cloud computing sectors.

A significant contributor to Amazon's success was the online retail segment, which generated net sales of $75.56 billion during the fourth quarter, an increase of 7.1%. This division continues to be the primary income source for the companyConversely, Amazon Web Services (AWS), the cloud computing arm of the business, yielded net revenue of $28.79 billion, which represented a 19% year-on-year growth—highlighting its role as a crucial growth engine for Amazon.

However, the earnings report showcased an unexpected surge in capital expenditures for the quarter, which reached $27.8 billion—much higher than the anticipated $22.3 billion and marking a historic high

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Looking ahead, Amazon projected that their capital expenditures for 2025 would be around $105 billion, predominantly allocated toward artificial intelligence and data center investmentsThis substantial spending reflects Amazon's strong conviction in the burgeoning AI business and its potential for long-term growth.

In a somewhat cautious forecast, Amazon estimated that its first-quarter revenue for 2025 would range between $151 billion and $155.5 billion, indicating a year-on-year growth of 5% to 9%, albeit below Wall Street expectationsFollowing this news, Amazon’s stock price experienced a significant drop of over 7% in after-hours trading.

Amazon attributed the conservative earnings guidance for the first quarter to unfavorable currency exchange fluctuations as well as the peculiar dynamics of 2024 being a leap year, which introduces an extra day of net sales.

The cloud computing division, AWS, reported revenues nearly in line with expectations at $28.79 billion, mirroring the growth of the previous quarter

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Operating profit also saw a remarkable 47% increase, reaching $10.6 billion and surpassing analyst predictionsDespite AWS's significant growth, its pace was slightly slower compared to rivals such as Microsoft Azure and Google CloudMicrosoft posted a 31% revenue growth for its Azure services, while Google Cloud reported a 30% increase in revenue.

Analyst Sky Canaves from Emarketer pointed out that AWS's growth has not accelerated as anticipated, remaining steady compared to the prior quarterThis stagnancy highlights the competitive pressures Amazon faces from Google and Microsoft, both grappling with similar capacity constraints.

Furthermore, prior to Amazon's report, both Microsoft and Google also announced that their cloud business revenues for the fourth quarter fell short of expectationsMicrosoft’s cloud revenue reached $40.9 billion, slightly missing projections, while Google Cloud's revenue came in at $11.9 billion, below analyst forecasts.

In response to these challenges, Amazon CEO Andy Jassy noted that the growth of AWS has been hampered by an insufficient supply of third-party chips

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“We could have grown faster,” Jassy acknowledged, expressing hopes that supply chain issues would ease in the latter half of 2025.

Turning to capital expenditures, Amazon's reported figure of $27.8 billion for the fourth quarter is not only significantly above market expectations but also shows a stark increase from $14.6 billion during the same period last yearChief Financial Officer Brian Olsavsky stated that this expenditure level would become “relatively representative” by 2025. Jassy emphasized that increased capital spending is directly linked to the fast-paced growth of the company“The faster we grow, the more capital expenditures we end up investing,” he explained, specifically pointing out the robust demand for AI capabilities as a driving force behind the decision to expand AWS investments.

Apart from Amazon, other tech giants like Alphabet, Google's parent company, plan to invest $75 billion in AI infrastructure by 2025, marking a 43% increase from its 2024 investment of $52.5 billion—significantly higher than Wall Street’s expectations

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Microsoft also aims to elevate its capital outlay to $80 billion in fiscal year 2025 to expand AI data centers.

This concerted push towards increased AI investments among tech giants stems from a strategy to harness the lucrative potential of artificial intelligence in a market where competition is intensifyingHowever, concerns have surfaced post the emergence of DeepSeek, raising questions regarding the substantial expenditure on AI infrastructureInvestors are wary that these excessive investments may not yield enough short-term returns to achieve profitability.

Despite these uncertainties, Jassy argues that declining inference costs do not equate to a reduction in overall technological expensesIn fact, the lowered costs could stimulate greater demand and investment in new technologies“Companies will find it easier to integrate inference and generative AI into all their applications, which will be very beneficial for both our customers and our business,” he noted.

On the e-commerce front, Amazon's online retail business continued its upward trajectory

The earnings report reflected that online store net sales reached $75.56 billion in the fourth quarter, experiencing a modest growth of 7.1%, which slightly edged out analyst expectations of $74.71 billionThis growth was significantly bolstered by the holiday shopping season, where consumer enthusiasm peaked during events like Thanksgiving, Black Friday, and Cyber MondayIn an effort to attract early holiday shoppers, Amazon initiated promotional activities starting in October 2024 and offered additional discounts during critical sales dates.

The relatively low inflation rate also played a vital role in enhancing consumer purchasing powerAccording to the National Retail Federation, holiday sales for November and December 2024 reflected a year-on-year increase, as consumers exhibited a lower sensitivity to prices, making them more inclined to shop during the holiday season.

Jassy declared that the previous fourth quarter marked Amazon’s most successful holiday shopping season to date, attributing the quarter’s outstanding performance to innovative strategies within the company's primary operations.

Sky Canaves, the chief analyst at MARKETER, stated that during the holiday season, Amazon accounted for nearly half of the e-commerce growth in the U.S

and is expected to further increase its market share in overall online sales by 2025, particularly as low-cost competitors like Temu and Shein fall under the pressures of new tariffs.

This past year, Amazon actively pursued a low-price strategy to tackle competitionYet, it has not been immune to the impacts of shifting policiesResearch from Marketplace Pulse indicates that Chinese sellers make up nearly 50% of Amazon's top sellers in the U.S., and the effect of policy changes on these sellers has potential ripple effects throughout the platformAdditionally, Amazon’s newly launched low-price store, “Haul,” faced regulatory risks as it sources products directly from China, offering items priced below $20, a majority of which are under $10, encompassing categories like fashion, home goods, lifestyle, and electronics.

“In light of the global economy’s influence, customers across all channels seek better prices,” explained Amazon Global Vice President and Executive President for Asia-Pacific, Daifeng Dai