Amazon shares slip amid soft sales outlook and cloud growth

Investing.com - Amazon (NASDAQ:AMZN) reported tepid growth at its all-important cloud computing segment and unveiled a lower-than-anticipated current-quarter financial forecast, while the e-commerce giant said it plans to spend a record amount on its artificial intelligence ambitions this year.

Shares in the company sank in premarket U.S. trading on Friday.

Sentiment was dented by a smaller-than-projected 19% uptick in revenue at Amazon Web Services, the firm's money-spinning cloud division, to $28.79 billion, due in part to an uneven supply of chips. Analysts had seen the figure at $28.87 billion, according to LSEG data cited by Reuters. Analysts were keeping tabs on the figure after soft recent cloud results from software titan Microsoft (NASDAQ:MSFT) and Google-owner Alphabet (NASDAQ:GOOGL).

Amazon's forecast for first-quarter sales of $151 billion to $155 billion also disappointed average expectations of $158 billion.

Meanwhile, as it was with several of Amazon's mega-cap tech peers, traders were focusing on comments from management about the company's AI spending plans. Following the emergence of a low-cost AI model from Chinese start-up DeepSeek last week, investors have begun to raise questions around the necessity of recent massive capital expenditures on AI by Big Tech names.

Still, Amazon said it is planning to spend more than $100 billion this year in its push to build out its generative AI services, which would be higher than the $78 billion it spent last year.

Speaking to analysts on Thursday, CEO Andy Jassy defended the expenditures, saying AI is "probably the biggest technology shift and opportunity in business since the internet." He predicted that "virtually every application" currently in existence today is on track to be "reinvented" by the technology.

Amazon's heavy spending comes amid an ongoing race in the broader tech industry to harness the possibilities offered by AI. DeepSeek's rise in notoriety, however, has threatened to exacerbate concerns over when these outsized investments will lead to investor returns.

For the three months ended on December 31, Amazon announced earnings per share of $1.86 on revenue of $187.8 billion. Analysts polled by Investing.com anticipated per-share income of $1.47 and sales of $187.33 billion.

Amazon's North American business, which drives the bulk of growth, saw revenue climb 10% to $115.6 billion year-over-year in the fourth quarter.

Earnings before interest and tax margins at its North America segment came in at 8%, up from 5.9% in the prior quarter. Analysts at RBC said this was a "continued proof point on the bull case and how [Amazon's] global retail business can ramp with the help of higher margin [third-party] services and advertising."

(Yasin Ebrahim and Frank DeMatteo contributed to this report.)

This article first appeared in Investing.com