Amazon (AMZN) stock took a hit after the company’s Q1 2025 sales outlook fell below Wall Street expectations.
Despite posting strong Q4 earnings, investors reacted negatively to Amazon’s lower-than-expected revenue guidance, sending the stock down over 3% in pre-market trading.
Q4 2024 Earnings Beat Expectations
Amazon reported Q4 revenue of $187.7 billion, exceeding analyst projections of $187.3 billion. Earnings per share (EPS) also came in stronger than expected at $1.86, compared to the anticipated $1.50. This marks a significant improvement from the previous year, where Amazon posted Q4 revenue of $169.9 billion and an EPS of $1.00.
Why Is Amazon Stock Dropping?
While Q4 numbers looked solid, Amazon’s guidance for Q1 2025 spooked investors. The company projected revenue between $151 billion and $155 billion, below analyst expectations of $158 billion. Amazon attributed this weaker forecast to foreign exchange headwinds, estimating a $2.1 billion unfavorable impact on sales.
Additionally, Amazon cited the impact of the 2024 leap year, which added $1.5 billion in sales last year but will not be present in 2025.
AWS Performance and AI Investments
Amazon Web Services (AWS), the company’s cloud computing arm, generated $28.7 billion in Q4 revenue, just shy of the expected $28.8 billion. This slight miss follows similar underwhelming cloud performance from rivals Microsoft (MSFT) and Google (GOOG).
However, Amazon is doubling down on AI. CEO Andy Jassy announced a planned $105 billion in capital expenditures for 2025, up from $75 billion in 2024, with most of the spending aimed at AI infrastructure and data centers.
Competition from DeepSeek AI
Amazon is also navigating increased competition from China-based AI startup DeepSeek. The unexpected rise of DeepSeek’s AI models has led to market uncertainty, as investors question how a relatively small startup managed to rival the AI capabilities of tech giants.
What’s Next for Amazon?
Despite the Q1 guidance disappointment, Amazon remains a dominant force in e-commerce and cloud computing. The company’s aggressive AI investments signal confidence in future growth. However, investors will be closely watching how AWS performs in the coming quarters and whether Amazon can navigate foreign exchange challenges.
For now, the stock drop highlights short-term concerns, but Amazon’s long-term strategy remains focused on AI dominance and cloud expansion.
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