Amazon stock performance after Q4 earnings showed strong revenue growth, surpassing Walmart for the first time with $187.8 billion in sales. However, weak Q1 guidance led to a stock dip, worrying investors despite Amazon’s AI and cloud expansion.
Amazon’s latest earnings report has left Wall Street divided.
While Q4 results were generally strong, the company’s forward-looking guidance hinted at a potential slowdown, triggering a drop in stock price. This has created a classic dilemma for investors: is this dip a buying opportunity, or a sign of further declines to come?
This uncertainty is causing anxiety among investors, who are now weighing the potential for long-term gains against the risk of short-term losses.
Amazon Earnings Surpasses Walmart, but Faces Challenges Ahead
A Yahoo article featured that Amazon’s Q4 2024 revenue hit $187.8 billion, a 10% increase, surpassing Walmart’s projected $180 billion. This achievement comes after Amazon overtook Walmart’s market cap in 2015, but it took nearly a decade for its revenue to match.
While Amazon’s retail business is still the largest earner, cloud services like Amazon Web Services (AWS) play a key role in its profits. AWS made up half of the company’s operating income, despite only accounting for 15% of total sales.
However, CEO Andy Jassy warned that the company faces issues like shipment delays and not enough electricity, which could affect growth.
Amazon Shares Drop 4% Amid Cloud Revenue
Reuters reported that Amazon’s stock fell by 4% on Friday after the company reported slower-than-expected cloud revenue growth, intensifying worries about Big Tech’s artificial intelligence investments taking longer to show returns.
This follows similar slowdowns at Microsoft and Google, highlighting challenges U.S. cloud giants face in scaling AI amidst infrastructure bottlenecks. Analysts are raising concerns over whether AI spending is paying off as expected, especially after China’s DeepSeek introduced a low-cost AI model, questioning the capital-intensive approach of Big Tech.
Despite these concerns, some analysts believe Amazon Web Services (AWS) may be gaining market share as its growth rate improved from the previous quarter.
HG Insights"AWS market share has grown to 50.1% among the top 10 cloud providers in 2024."
Amazon’s $100 Billion AI Investment Could Make AMZN Stock a Smart Investment
Annie Palmer wrote in her CNBC news article that Amazon plans to spend $100 billion on capital expenditures in 2025, with the bulk directed toward advancing its AI technology. Wall Street analysts are optimistic about the company’s future growth, believing that AI investments will drive substantial revenue gains, particularly in its AI-powered advertising and cloud services.
Amazon has already made considerable strides in AI, with analysts projecting that its AI-powered advertising business could grow to $20 billion by 2025—up from $4 billion last year.
Deutsche Bank analyst Lloyd Walmsley expressed confidence in Amazon’s AI investments, noting that they will drive substantial revenue growth over time. Other analysts echo this sentiment, emphasizing that Amazon’s capabilities in AI give it a significant competitive edge over rivals.
A major area where AI is expected to make a significant impact is AWS, which already leads the cloud computing space. AI is poised to be a key differentiator for AWS, helping to further solidify Amazon’s position in the market.
Additionally, AI technology has the potential to improve Amazon’s operating margins by enhancing efficiency and reducing costs across various business segments.
Amazon’s commitment to AI goes beyond current operations, with ongoing investments in research and development expected to lead to new products and services in the future. Given the company’s history of innovation, it is well-positioned to continue discovering new opportunities for growth.
While Amazon’s stock has seen some volatility, analysts are optimistic about its long-term prospects. The consensus is clear: Amazon’s AI investments are expected to drive future growth, making the stock an attractive option for investors looking to buy in while the company’s AI journey is still in its early stages.
With its strong growth potential and commitment to AI, Amazon continues to position itself as a key player in the tech industry, and many experts believe now is the right time to invest.
Investors are advised to stay informed about Amazon’s progress in AI and consider this as a key factor in their decision to invest. As the company continues to invest heavily in AI, the stock will likely see significant long-term gains as these technologies mature.
Make The Most Out Of The Post-Earning Dip
Amazon’s stock decline could be an opportunity for investors, Hunting Alpha wrote, as Amazon works to lower per-unit and freight costs to improve margins.
Its move toward in-house chip design to reduce dependence on NVIDIA could also drive AWS’s EBIT margin to 50%.
NerdWallet“Buy the dip” is an investment tactic that follows the basic principle of “buy low, sell high..."
Although Amazon trades at an 18% premium compared to competitors, its scale, margin expansion, and long-term growth outlook support its valuation.
High capital expenditures may impact free cash flow in the short term, but they lay the foundation for future gains. For long-term investors, this dip could be a chance to buy into Amazon’s potential.
Amazon Sellers and Vendors Stand to Gain
Amazon’s Q4 2024 earnings exceeded expectations, with a 10% increase in total net sales to $187.8 billion.
Steven Pope, founder of Amazon Agency My Amazon Guy, shared his insights on LinkedIn, stating that he anticipated this strong performance. This growth is a promising sign for both 1P and 3P sellers.
