Amazon surpassed earnings expectations in the fourth quarter, but its cautious outlook has led to concerns about an AI slowdown. The tech giant reported higher-than-expected earnings, but it also issued a soft revenue forecast, citing the impact of currency fluctuations and rising AI costs.
Following the earnings release, Amazon shares dropped by over 4% in after-hours trading. Despite this, the stock has gained 9% in 2025, adding to a 44% rally in 2024.
Amazon’s cautious guidance follows similar warnings from Alphabet, Microsoft, and Meta, signaling a slowdown in the AI sector. These U.S. tech firms face growth challenges due to the significant investments needed for data centers. Additionally, China’s DeepSeek launched its AI model R1, raising concerns over inflated valuations of U.S. tech leaders.
Amazon expects revenue to be between $151 billion (€145.2 billion) and $155.5 billion (€149.5 billion), falling short of the $158.5 billion (€152.4 billion) forecasted by analysts. The company also anticipates a $2.1 billion (€2.0 billion) foreign exchange impact.
Operating income is expected to be between $14 billion (€13.5 billion) and $18 billion (€17.3 billion), while analysts had predicted $18.2 billion (€17.5 billion). The U.S. dollar’s strength, reaching its highest level since November 2022, likely hurt Amazon’s overseas earnings.
Amazon’s capital expenditure on data centers reached $27.8 billion (€26.72 billion) in the December quarter, marking a 90% increase from the previous year.
Amazon reported quarterly revenue of $187.8 billion (€180.53 billion), a 10% increase from the previous year, surpassing analysts’ expectations of $187.3 billion (€180.05 billion). Excluding currency impacts, revenue grew 11% year-over-year.
Net income soared 189% year-on-year to $20 billion (€19.23 billion), largely driven by cost-cutting efforts and layoffs.
Amazon Web Services (AWS) continued its strong performance, growing by 19% year-over-year for the third straight quarter, meeting expectations. CEO Andy Jassy highlighted AWS innovations, including the Trainium2 AI chip and Amazon Nova’s foundation models. Despite AWS’s strong performance, competitors like Microsoft Azure and Google Cloud grew around 30% during the same period.
Amazon’s Online Stores and Advertising Services also showed growth, with annual increases of 8% and 18%, respectively. Online Stores remain the largest revenue driver, bolstered by the holiday season. The company’s advertising platform, now its second-largest revenue source, ranks third globally behind Alphabet and Meta.
CEO Andy Jassy remarked, “This holiday season was our most successful yet. We’re grateful to customers, sellers, and employees for making it possible.”