AMZN: Amazon Stock Drops as Cloud Revenue, Low-Bar Guidance Weigh on Sentiment

Investors paid no attention to record revenue of $187.8 billion as shares tumbled 4% in after-hours trading.

🔥 Shares Flop Despite Record Revenue

• Amazon stock AMZN plunged 4% in after-hours trading Thursday and is on track to open Friday’s session with just about the same loss after a solid earnings report not without some holes.
• The tech titan racked up a mindblowing $187.8 billion in revenue — a record — for the three months to December, posting 10% year-over-year growth. Earnings per share hit $1.86, topping $1.49 expected.

🚩 AWS Fails to Surprise Traders

• What drove investors to hit the sell button was the company’s cloud unit, Amazon Web Services, not skyrocketing. The division where AI lives and grows posted revenue of $28.8 billion, up 19%, and just in line with expectations. AWS is the company’s cash cow with 36.9% operating profit margins — way above the average 6.6% for the rest of Amazon.
• Also, the forward-looking guidance didn’t inspire confidence. Amazon projects the current quarter to pick up revenue of $151 billion to $155.5 billion — below Wall Street’s $158.6 billion.

🚀 Capex Figure Shoots Much Higher

• The figure everyone’s looking at — capital expenditures came in at $27.8 billion, nearly double the size of the year-earlier quarter. It’s all thanks to lavish spending on data centers and equipment for artificial intelligence.
• Speaking of AI, CEO Andy Jassy struck an optimistic note. “These benefits are often realized by customers (and the business) several months down the road, but these are substantial enablers in this emerging technology environment and we’re excited to see what customers build.”