Amazon disappoints investors with weak outlook despite upbeat earnings

Amazon reported fourth-quarter earnings that beat analysts' estimates but provided weaker-than-expected guidance due to potential foreign exchange impact and rising AI spending.

The e-commerce giant's shares fell more than 4% in extended trading following its earnings report. As of market close on 6 February, the stock had risen 9% this year, following a 44% rally in 2024. 

Amazon's soft guidance echos Alphabet, Microsoft, and Meta, suggesting the frenzy AI industry may face a slowdown. US tech giants face growth hurdles due to capacity constraints as surging demands require continued heavy investment in data centre.

Meanwhile, the Chinese startup DeepSeek recently developed its AI mode R1 on a friction cost of these hyperscalers, raising concerns about a valuation hype among US top tech firms. 

Amazon expects revenue of $151.0 billion (€145.2 billion) and $155.5bn (€149.5bn), well below the estimated $158.5bn (€152.4bn). In the statement, it cited the guidance "anticipates an unusually large, unfavourable impact of approximately $2.1bn (€2.0bn) from foreign exchange rates".

It forecasts operating income to be between $14bn (€13.5bn) and $18bn (€17.3bn), while analysts expected an average of $18.2bn (€17.5bn). 

The US dollar index surged to the highest since November 2022 in January, fuelled by Donald Trump's presidency and the Federal Reserve's hawkish shift. Amazon's online retail sales may have been negatively impacted when converting overseas income into the dollar on books. 

Additionally, Amazon has been investing heavily in data centre expansion, with capital expenditure reaching $27.8bn (€26.72bn) in the December quarter - an increase of approximately 90% from the same period in 2023. 

Amazon reported revenue of