Amazon.com Inc. (AMZN) experienced a significant decline in its stock price on Thursday following weaker-than-expected growth in its cloud computing unit, Amazon Web Services (AWS), and a disappointing sales forecast for the first quarter of 2025. Shares fell as much as 5% in extended trading, erasing approximately $90 billion in market value.
AWS, a critical driver of Amazon’s profitability, reported a 19% increase in revenue to $28.79 billion for the fourth quarter of 2024, falling short of analysts’ expectations of $28.87 billion. Amazon CEO Andy Jassy attributed the slower growth to supply constraints in computer chips, which have delayed capacity expansion. “We could be growing faster if not for some of the constraints on capacity,” Jassy said during an investor call.
The company’s first-quarter revenue forecast also missed expectations, with Amazon projecting sales between $151 billion and $155 billion, compared to the average analyst estimate of $158 billion. Operating profit for the quarter is expected to range from $14 billion to $18 billion, below the consensus estimate of $18.35 billion.
Despite the cloud slowdown, Amazon’s retail business showed resilience, with online sales growing 7% to $75.56 billion in the fourth quarter, surpassing estimates of $74.55 billion. Advertising revenue, another critical metric, rose 18% to $17.3 billion, slightly below expectations of $17.4 billion.
Amazon’s net income nearly doubled to $20 billion in the fourth quarter, up from $10.6 billion a year earlier, with earnings per share of $1.86, beating estimates of $1.49. However, investors remain concerned about the company’s heavy capital expenditures, particularly in artificial intelligence (AI) infrastructure, which totaled $26.3 billion in the fourth quarter.
“After very strong third-quarter numbers, this quarter the growth rates all missed. That’s what the market doesn’t want to hear,” said Daniel Morgan, senior portfolio manager at Synovus Trust.
Amazon is not alone in facing challenges in the cloud sector. Competitors Microsoft and Google parent Alphabet also reported slowing cloud growth in their recent earnings, with both companies anticipating significant capital expenditures in 2025 to support AI development.
As Amazon continues to invest in AI and cloud infrastructure, the company aims to regain momentum in its AWS division and meet growing demand for AI-driven services. However, the path to sustained growth remains uncertain amid increasing competition and supply chain constraints.