(Bloomberg) — Amazon.com Inc. projected profit in the current quarter that fell short of analysts’ estimates, suggesting the company continues to ramp up spending to support artificial intelligence services.
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Operating income will be $14 billion to $18 billion in the period ending in March, the company said Thursday in a statement. Analysts, on average, projected $18.2 billion, according to data compiled by Bloomberg. First-quarter sales will be as much as $155.5 billion, compared with an average estimate of $158.6 billion.
Chief Executive Officer Andy Jassy has been cutting costs and focusing the company on three business pillars: e-commerce, cloud computing and advertising. Determined to become a supermarket for artificial intelligence products and services, he’s plowing billions of dollars into data centers and homegrown chips capable of handling AI tasks and taking on market leader Nvidia Corp.
Amazon shares declined about 1% in extended trading after closing at $238.83 in New York. The stock has gained 8.9% so far this year after a 44% jump in 2024.
While Amazon’s overall quarter was generally positive, “investors immediate concerns are around Q1 guidance, which was below expectations, mostly because of the impact of a big currency drag and the impact of lapping a leap year,” said Gil Luria, an analyst at DA Davidson & Co. The company said the extra day in the quarter in 2024 boosted sales by about $1.5 billion.
Amazon Web Services revenue jumped 19% to $28.8 billion in the quarter ended Dec. 31, in line with analysts’ estimates. It was the third straight quarter of 19% growth for the cloud unit. Operating income generated by the unit was $10.6 billion, exceeding the average projection of $10.1 billion.
The Seattle-based company’s two main cloud rivals both reported lackluster quarterly results. Alphabet Inc.’s shares fell sharply on Tuesday after the company said sales missed estimates. Last week, Microsoft Corp. said its own cloud sales growth was hurt because it didn’t have enough data centers to handle demand for its AI products.
“AWS growth did not accelerate as anticipated and instead matched Q3 levels, indicating that the company is challenged by the same types of capacity constraints facing rivals Google and Microsoft,” said Sky Canaves, an analyst at Emarketer.
