It’s remarkable how foreign-exchange fluctuations and ambitious capital expenditure plans can shake up a major tech stock. Amazon’s (AMZN) shares dipped by 3% to $231.80 each in pre-market trading on Friday, following the company’s mixed first quarter guidance and announcement of significant investments in AI infrastructure by 2025. The tech giant’s ticker page was buzzing as the most active on Yahoo Finance, surpassing retail-investor favorite Palantir (PLTR) which has been gaining momentum post-earnings this week.
Amazon projected first quarter revenue to fall between $151 billion and $155 billion, falling short of analysts’ expectations of $158 billion due to an anticipated $2.1 billion impact from currency fluctuations. In a trend similar to Microsoft (MSFT) and Meta (META) this earnings season, Amazon unveiled a substantial capital expenditure forecast of $104 billion for the year, exceeding analyst predictions of $80 billion to $85 billion.
Despite the guidance, analysts remain optimistic about Amazon for two main reasons. Many anticipate a sales resurgence in Amazon Web Services later this year, driven by the company’s aggressive investments in capital expenditure. Additionally, the company’s strong quarterly performance has garnered positive attention from the Street.
Notable highlights from Amazon’s quarter, according to Yahoo Finance, include three consecutive quarters of 19% sales growth for AWS, an operating profit margin of 46.9% in AWS, a notable increase from 29.6% a year ago, and a second consecutive quarter of accelerated sales growth in Amazon’s physical stores, resulting in the highest quarterly operating income ever at $21.2 billion.
Analysts’ insights on Amazon’s quarter and future outlook provide further context:
– Pivotal Research analyst Jeffrey Wlodarczak reiterated a Buy rating with a price target of $260, emphasizing Amazon’s strong position in core businesses, growth prospects in AWS and other segments, and potential for margin expansion.
– DA Davidson analyst Gil Luria maintained a Buy rating with a price target of $280, highlighting positive commentary on AWS’s health and broad adoption across various services, with a focus on AI-related offerings.
Overall, Amazon’s strategic investments and solid performance have instilled confidence in analysts, setting a positive tone for the company’s future growth.
With their capacity constraints in mind, they anticipate being able to further accelerate growth, a trend they project to pick up steam in the latter half of the year. Our confidence in AWS’s leading position among the top three hyperscalers remains unwavering, bolstered by insights from our DEN experts, which suggest that Amazon has quickly caught up to and now surpassed Azure in AI-related services.
JP Morgan analyst Doug Anmuth maintains an Overweight rating and a reiterated Price Target of $270. Amazon perceives GenAI as the most significant opportunity since the inception of cloud computing and the most substantial technological shift since the advent of the Internet. Nearly every application is expected to incorporate GenAI, with many companies gradually integrating agents over time. Amazon interprets the $26.3 billion capex in the fourth quarter as a reasonable indication of its 2025 capital investment pace, translating to approximately $105 billion in annual capex by 2025. The bulk of this investment will cater to the expanding demand for tech infrastructure across AI services, as well as provide support for North America and International operations. Amazon has emphasized that they only procure infrastructure in response to robust demand signals, a stance that we interpret as bullish for AWS’s growth trajectory over the coming years.
In light of DeepSeek, CEO Andy Jassy anticipates a significant decline in inference costs over time. Drawing a parallel to the history of cloud services, where AWS reduced prices 134 times between 2006 and 2023, Amazon foresees that the reduction in inference costs will lead to an increase in customers’ overall spending as they integrate applications with inference and GenAI (termed the Jevons Paradox). Similar to Meta (META) and Alphabet (GOOG), substantial infrastructure investments are poised to become a key competitive advantage, with the ongoing spending indicating a positive outlook for several years of robust revenue growth for AWS.
Wedbush analyst Dan Ives reiterates an Outperform rating and a reiterated Price Target of $280, highlighting potential catalysts in the near term, including the increasing contribution of AI to AWS’s growth as capacity constraints ease in the second half of 2025, more significant enhancements in cost efficiency driven by advanced automation and robotics, the commercialization of AI capabilities in Alexa, the monetization of Project Kuiper expected to commence later this year or in the first half of 2026, and an anticipated rise in Prime Subscription prices in early 2023.
Brian Sozzi serves as Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi, Instagram, and LinkedIn. For story tips, reach out to brian.sozzi@yahoofinance.com. Stay updated with the latest stock market news and in-depth analysis, covering market-moving events. Read up on the most recent financial and business news from Yahoo Finance.
