Amazon just delivered a blowout quarter—on paper, at least. The e-commerce and cloud computing giant reported fourth-quarter earnings that exceeded expectations by a wide margin. With earnings per share (EPS) of $1.86 compared to an expected $1.49 and revenue of $187.8 billion slightly surpassing the projected $187.3 billion, this should have been a celebration for shareholders. Instead, Amazon’s stock tumbled more than 5% in after-hours trading.
So, what gives? How does a company beat expectations by 26% and still see its stock drop? The answer lies in Wall Street’s obsession with the future rather than the present.
The Good: Amazon’s Strong Quarter
Let’s start with the positives. Amazon delivered impressive growth across key business segments:
• E-commerce strength:The company’s core retail business remained robust despite concerns about consumer spending.
• Advertising boom:Amazon’s ad business grew 26% year-over-year, continuing to be a high-margin revenue stream.
• AWS momentum:The crown jewel of Amazon, AWS (Amazon Web Services), grew 19% YoY, reaching $28.79 billion in revenue.
These figures indicate that Amazon is firing on multiple cylinders, benefiting from its diversified business model.
The Bad: Disappointing Guidance
However, the after-hours sell-off wasn’t about what Amazon did—it was about what Amazon said it will do.
• Revenue concerns:Amazon forecasted first-quarter revenue between $151 billion and $155.5 billion, below analysts’ expectations of $158.6 billion.
• Operating income worries:The company projected Q1 operating income between $14 billion and $18 billion, with the midpoint falling short of market estimates.
This lukewarm guidance suggests Amazon expects a slowdown, which immediately raises red flags for investors.
The Ugly: AWS Uncertainty
While AWS continues to grow, Amazon’s management warned that cloud computing growth could be “lumpy” in the coming years. Investors don’t like uncertainty, and anything that suggests AWS—Amazon’s highest-margin business—might experience inconsistent growth is cause for concern.
Even a small revenue miss in AWS ($28.79 billion reported vs. $28.84 billion expected) was enough to cast doubt on its near-term trajectory. Microsoft’s Azure and Google Cloud have been facing similar headwinds, and Wall Street is wary of potential slowdowns in enterprise spending on cloud services.
The Bigger Picture
Amazon remains a behemoth, and one quarter of cautious guidance doesn’t change that. However, in today’s high-expectation environment, even minor disappointments can lead to stock declines. The company’s capital expenditure (capex) plans, which could exceed $100 billion in 2025, are also under scrutiny as investors weigh the return on these massive investments.
The broader takeaway? Amazon’s fundamentals are strong, but Wall Street is forward-looking. Investors will be watching closely to see if this cautious outlook is just a blip or a sign of deeper issues.
Disclaimer:
The information provided in this article is for informational and educational purposes only and should not be construed as financial or investment advice. While every effort has been made to ensure accuracy, the author and publisher make no guarantees regarding the completeness or reliability of the information presented. Stock prices and market conditions can fluctuate, and past performance is not indicative of future results. Readers should conduct their own research and consult a professional financial advisor before making any investment decisions. The author and publisher assume no responsibility for any financial losses or decisions made based on the content of this article.
