Amazon Beats EPS but Low Revenue Guidance Disappoints Investors

Amazon showcases impressive Q4 results with a substantial EPS increase, yet its weaker revenue guidance has stirred investor concerns. Guidance expectations for Q1 2025 reflect a cautious outlook.

Date: 13-02-2025

AI Rating: 6

Fiscal Performance Overview
Amazon reported a remarkable 10.5% year-over-year revenue growth, with total revenues reaching $187.8 billion, exceeding Wall Street's expectations of $187.3 billion. Additionally, the company's adjusted earnings per share (EPS) rose by an impressive 86% to $1.86, significantly higher than the consensus estimate of $1.49. This performance highlights Amazon's robust financial strength.

Market Reaction and Guidance
Despite the strong performance, the reaction from the market was initially negative, influenced by management's lower-than-expected revenue guidance for the first quarter of 2025. Analysts had anticipated revenues of $158.33 billion; however, management projected a range of $151 billion to $155.5 billion. This cautious outlook raises concerns among investors about Amazon's growth trajectory amidst recent market challenges, including competition from new AI technologies.

Revenue Growth Rate and Profitability
Looking forward, Amazon's long-term fundamentals appear promising. The company's AWS segment has reached an annualized revenue run rate of $115 billion, with AWS revenues increasing by 19% year over year to $28.8 billion and operating income rising by an impressive 49.3% to $10.6 billion. With AWS contributing significantly to overall profits, the continued demand for AI from enterprises is expected to sustain growth in this segment.

Strategic Investments
As part of its AI strategy, Amazon commits nearly $100 billion in capital expenditures for AI initiatives in 2025. This strategy showcases the company's intent to harness AI to enhance various facets of its operations, thus potentially driving up future profitability.

Valuation Considerations
Despite trading at a forward earnings multiple of 38, analysts project Amazon's revenues and EPS to grow by 9.58% and 29.65% respectively in 2025. This could support the company’s valuation despite its seemingly high price-to-earnings ratio, reflecting investor confidence in operational efficiency and profit growth.

Conclusion
Acknowledging the positive growth outlook alongside documented performance, Amazon remains an interesting investment opportunity. However, the anticipated lower revenue guidance necessitates cautious monitoring by investors.

Stocks: AMZN ADBE QCOM