Amazing what some foreign-exchange fluctuations and eye-popping capex guidance will do to a large-cap tech stock.
Shares of Amazon (AMZN) were clipped by 3% to $231.80 each in pre-market trading on Friday, after the tech giant delivered mixed first quarter guidance and promised big spending on AI infrastructure in 2025.
The company’s ticker page was the most active on the Yahoo Finance platform, ahead of retail-investor favorite Palantir (PLTR), which has been on a post-earnings tear this week.
Amazon guided to first quarter revenue of between $151 billion and $155 billion. Analysts were anticipating $158 billion, with the miss the function of a $2.1 billion expected hit from currency fluctuations.
Similar to Microsoft (MSFT) and Meta (META) this earnings season, Amazon uncorked a whopper of a capex guide. It sees $104 billion in capex spending this year, well above analyst forecasts of $80 billion to $85 billion.
The Street has opted to stay bullish on Amazon after its results for two reasons, however.
Most analysts have pointed to a sales re-acceleration in the key Amazon Web Services cloud business later this year, amid the company’s aggressive capex spending.
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“The shares have pulled back on the guidance and the fact that 2025 is likely an investment year, but we expect by second half 2025 this heavy capex investment + accelerating AI adoption (which we believe will also accelerate the move to the cloud) should begin to materially re-accelerate cloud revenue,” Pivotal Research analyst Jeffrey Wlodarczak said in a client note.
The other factor is that Amazon just had a good quarter.
What stood out to Yahoo Finance:
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Three straight quarters of 19% sales growth for AWS.
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AWS operating profit margin of 46.9%, versus 29.6% a year ago.
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Second consecutive quarter of accelerated sales growth at Amazon’s physical stores.
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Amazon delivered its highest quarterly operating income ever at $21.2 billion.
Here are several of the best Wall Street insights on Amazon’s quarter and outlook.
“Amazon has a deep moat around their core businesses driven by their unmatched scale and appears to have numerous healthy organic revenue growth opportunities driven primarily by their high margin AWS cloud segment (which we expect to grow from 17% of revenue to ~35% in 5 years), extension of their e-commerce/fulfillment arms into new segments/internationally, continued rapid growth in their advertising business [already #3 in the world behind GOOG (BUY) and META (BUY)] and proven ability to develop new successful products/revenue streams leveraging their massive scale. This is all enhanced by what we believe is the potential to materially boost operating margins driven by scale, leveraging robotics/AI and benefits from an increasing % of revenue from high margin cloud computing/advertising combined with what appears to be an attractive valuation. AMZN remains on track at AWS and appears ahead of schedule on better monetization in its core retail/advertising/subscription businesses.”