Amazon (AMZN), among the Magnificent Seven, posted quarterly results that sent shares down this morning. AMZN stock lost 8% after setting a capital expenditure that rivals that of Microsoft (MSFT).
Amazon earned $1.95 per share as revenue increased by 13.6% Y/Y to $213.4 billion. Despite net sales of up to $178.5 billion expected in the first quarter of 2025, operating income will dip. It is expecting operating income to come in between $16.5 billion and $21.5 billion, compared to the $18.4 billion reported in Q1/2025.
Amazon plans to spend $200 billion this year in capital expenditures. Investors assumed that artificial intelligence investments were adding to those costs. However, the expenditure is predominantly in AWS for core and AI workloads. Since it is monetizing capacity as fast as the company installs the hardware, the firm should grow AWS revenue as long as AI demand continues.
Amazon is expecting that AWS will have a 35% operating margin through the fourth quarter, up by 40 bps Y/Y. Still, risks are rising that depreciation costs might grow faster than margin growth. As competition rises from more AI data center supply for Oracle (ORCL) and other middleware firms, AMZN stock could face more selling pressure.
