Amazon Beats Q4 Earnings Estimates, Issues Weak Q1 Guidance

Amazon.com (AMZN Quick QuoteAMZN – Free Report) delivered fourth-quarter 2024 earnings of $1.86 per share, which increased 84.2% from the year-ago quarter and beat the Zacks Consensus Estimate by 22.37%.

AMZN’s net income increased to $20 billion in the fourth quarter compared with $10.6 billion in the year-ago quarter. Net sales of $187.8 billion rose 10% year over year. The figure came within management’s guidance of $181.5-$188.5 billion and beat the Zacks Consensus Estimate by 0.28%.

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Excluding the $0.9 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 11% compared with the fourth quarter of 2023.

Top-line growth was driven by strength in Amazon Web Services (“AWS”) segment. Solid momentum across the North America and International segments was a positive. Growing advertising business also benefited the company in the reported quarter. AWS’ growing investments in generative AI are likely to continue aiding it in gaining momentum among cloud customers in the near term.

Amazon’s strong global presence, growing Prime momentum and increasing efforts toward gaining strong traction among small and medium businesses are likely to drive its financial performance in the days ahead. However, geopolitical tensions, foreign exchange headwinds, recessionary fears, inflation, interest rates and regional labor market constraints are concerning.

Top-Line Details

Product sales (43.8% of sales) increased 7.2% year over year to $82.2 billion. Service sales (56.2% of sales) rose 13.2% from the year-ago quarter to $105.5 billion. By segment, North America revenues (61.6% of sales) rose 9.5% from the year-ago quarter to $115.5 billion, which beat the Zacks Consensus Estimate by 0.95%. International revenues (23.1% of sales) grew 7.9% year over year to $43.4 billion, which missed the consensus mark by 1.52%.

AWS revenues (15.3% of sales) rose 18.9% year over year to $28.7 billion, which missed the consensus mark by 0.16%. The company launched AWS Asia Pacific (Thailand) and AWS Mexico (Central) Regions.

Strengthening relationships with third-party sellers remained another positive. In the reported quarter, sales generated by third-party seller services rose 9% on a year-over-year basis to $47.4 billion, which lagged the Zacks Consensus Estimate by 0.4%.

Sales from robust advertising services increased 18% year over year to $17.2 billion, which missed the consensus mark by 0.48%. AMZN experienced 8% year-over-year growth in its physical store sales, which were $5.57 billion in the reported quarter. The figure beat the consensus mark by 3.15%.

The company’s online store sales were $75.5 billion, up 7% year over year. The figure beat the Zacks Consensus Estimate by 1.16%.

AMZN Adds New AWS Capabilities in Q4

Amazon announced a plethora of new AWS capabilities in the fourth quarter, including Amazon Nova. It includes Amazon’s own family of foundation models that compare favorably in intelligence against the leading models in the world but offer lower latency, lower price, and integration with key Bedrock features like fine-tuning, model distillation, knowledge bases and agentic capabilities. Thousands of customers are already using Nova, including Deloitte, SAP, Robinhood, Palantir Technologies, Dentsu Digital, AppFolio, Fortinet, Trellix, 123RF, Envato, Pattern and Ativion.

The company announced the general availability of Trainium2, which includes EC2 Trn2 instances, powered by Trainium2 AI chips. It offers 30-40% better price performance than current generations of GPU-based instances. Amazon also introduced Trainium2 UltraServers, a new type of EC2 Trn2 offering ultra-fast networking to connect four Trn2 servers into an extra-large server, enabling even faster training and inference on AWS.

The company launched Project Rainier in collaboration with Anthropic, which uses hundreds of thousands of Trainium2 chips to build the world’s largest AI compute cluster.

The company added new leading foundation models in Amazon Bedrock from DeepSeek, Luma AI and poolside. It introduced Amazon Bedrock Marketplace, where customers can choose from more than 100 popular models. Amazon added new features for Amazon Bedrock, including Prompt Caching, Intelligent Prompt Routing, and Model Distillation, all of which help customers achieve lower cost and latency in their inference.

The company added new Amazon SageMaker AI features, including the ability to manage costs and prioritize which workloads should receive capacity when budgets are reached. Amazon also launched the next generation of Amazon SageMaker, which brings together all of the data, analytics services and AI services into one interface to do analytics and AI more easily at scale.

The company introduced new Amazon Q Transformations that make it easy to move from Windows .NET applications to Linux, VMware to EC2, and accelerates mainframe migrations from multi-year to multi-quarter efforts.

The launch of Amazon Aurora DSQL is expected to be a game changer. It is the fastest distributed database with 99.999% multi-region availability, virtually unlimited scalability, strong consistency, zero infrastructure management, PostgreSQL compatibility, and 4x faster reads and writes vs. other popular distributed SQL databases.

The company signed new AWS agreements with the U.S. Army, Intuit (INTU Quick QuoteINTU – Free Report) , PayPal (PYPL Quick QuotePYPL – Free Report) , Norwegian Cruise Line Holdings Ltd., Northrop Grumman, Medtronic, The Guardian Life Insurance Company of America, Reddit, Japan Airlines, Baker Hughes, The Hertz Corporation, Redfin, Chime and Asana (ASAN Quick QuoteASAN – Free Report) .

Amazon announced GROW with SAP on AWS to help customers rapidly deploy SAP’s enterprise resource planning.

Prime Services Boost Subscription Revenues

Strength in Prime on the back of ultrafast delivery services, and expanding original content and an international slate of content on Prime Video were positives. Amazon witnessed 10% year-over-year growth in its subscription services sales, which were $11.5 billion in the reported quarter. The figure missed the consensus mark by 0.77%.

Amazon delivered at its fastest speeds ever for Prime members in 2024. In the reported quarter, the company delivered over 65% more items to U.S. Prime members on the same day or overnight than in fourth-quarter 2023.

In the fourth quarter, AMZN held a record-breaking Black Friday Week and Cyber Monday deal event that was also the largest ever for independent sellers in Amazon’s store. It also launched Amazon Haul, a new shopping experience in Amazon’s U.S. shopping app and mobile site, with ultra-low prices.

Amazon was also named lowest-priced U.S. retailer by Profitero for the eighth year in a row. The study found Amazon’s online prices were an average of 14% less than other major U.S. retailers.

Amazon drew 50 million worldwide viewers to Red One in its first four days, making it Amazon MGM Studios’ most-watched film debut ever on Prime Video. Amazon finished the third season of Thursday Night Football on Prime Video with a full-season average of 13.2 million viewers according to Nielsen — an 11% increase over 2023 — and a peak of 24.7 million during the Wild Card playoff game between the Steelers and Ravens.

This Zacks Rank #2 (Buy) company had the biggest fourth quarter for Kindle device sales in over a decade, with a new lineup of Kindles driving a 30% year-over-year increase in devices sold. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operating Details

Operating expenses were $166.58 billion, up 6.3% from the year-ago quarter. As a percentage of revenues, the figure contracted 350 basis points (bps) on a year-over-year basis to 88.7%.

The cost of sales, fulfillment and technology and infrastructure expenses increased 6.9%, 7.2% and 7% year over year to $98.8 billion, $27.9 billion and $23.5 billion, respectively.

Sales and marketing and other operating expenses were $13.1 billion and $176 million, up 1.7% and 14.3% year over year, respectively. General and administrative expenses declined 4.9% to $2.86 billion.

Operating income increased to $21.2 billion in the fourth quarter compared with $13.2 billion in the fourth quarter of 2023.

North America segment operating income was $9.3 billion compared with an operating income of $6.5 billion in the fourth quarter of 2023.

International segment operating income was $1.3 billion against an operating loss of $0.4 billion in fourth-quarter 2023.

AWS segment operating income was $10.6 billion compared with an operating income of $7.2 billion in the year-ago quarter.

Balance Sheet & Cash Flow

As of Dec. 31, 2024, cash and cash equivalents were $78.7 billion, up from $75.09 billion as of Sept. 30, 2024.

Marketable securities totaled $22.4 billion as of Dec. 31, 2024, up from $12.9 billion as of Sept. 30, 2024.

The long-term debt was $52.6 billion at the end of the reported quarter, down from $58.3 billion at the end of the previous quarter.

Operating cash flow increased 36% to $115.9 billion for the trailing 12 months compared with $84.9 billion for the trailing 12 months ended Dec. 31, 2023.

Free cash flow increased to $38.2 billion for the trailing 12 months compared with $36.8 billion for the trailing 12 months ended Dec. 31, 2023.

Guidance

Amazon stock dipped more than 4% in after-hours trading due to disappointing guidance for the first quarter. Management cited foreign exchange headwinds and the absence of an extra Leap Year Day as factors likely to impact growth in the current quarter. In the first quarter of 2024, the impact from Leap Year added approximately $1.5 billion in net sales.

For first-quarter 2024, Amazon expects net sales between $151 billion and $155.5 billion. Net sales are expected to grow 5-9% from the year-ago quarter’s reported figure.

Management projects an unfavorable foreign exchange impact of 150 bps.

Operating income is anticipated between $14 billion and $18 billion.