Amazon Declines Nearly 3% In Friday Pre-Market: What's Going On?

Amazon.com Inc (AMZN) shares fell by nearly 3% in the pre-market session on Friday, February 7, 2025, following the company's fourth-quarter earnings release on Thursday, February 6. The decline in the stock price can be attributed to a combination of factors, including weaker-than-expected revenue forecasts, sluggish cloud growth in Amazon Web Services (AWS), supply chain issues, and increased competition in the cloud computing space.



Amazon projected Q1 revenue between $151 billion and $155.5 billion, missing analyst estimates of $158.5 billion. The company's cloud division sales slightly missed consensus estimates but outpaced the same quarter last year. However, AWS revenue rose 19% to $28.79 billion, still falling short of expectations. CEO Andy Jassy cited supply chain issues, particularly delayed chip deliveries, as a key factor slowing AWS growth.



The company's capital expenditures hit $27.8 billion during the quarter, a significant increase from $14.6 billion a year ago, as it continues to invest heavily in AI technology to stay competitive. Amazon plans to invest nearly $100 billion in AI initiatives this year, surpassing competitors like Microsoft Inc. MSFT and Alphabet Inc. GOOG GOOGL. However, investors have become impatient with these high capital expenditures, particularly in artificial intelligence (AI) infrastructure, which may have contributed to the stock's decline.

Amazon's President and CEO Andy Jassy cautioned that growth would be "lumpy" and indicated that the company might encounter capacity challenges due to hardware delays and insufficient electricity supply. He expects these limitations to ease in the second half of 2025. Despite these challenges, Amazon shares closed 1.26% lower to close at $238.83 on Thursday, following a 44% surge in 2024.



Investors may be cautious due to the company's guidance and the potential capacity challenges it faces in the near term. However, Amazon's strong earnings and revenue growth, as well as its continued investment in AI technology, suggest that its overall growth trajectory remains positive. As the company navigates these challenges, investors will be closely monitoring its progress and the broader market trends to make informed decisions about their portfolios.

In conclusion, Amazon's decline in the pre-market session on Friday can be attributed to a combination of factors, including weaker-than-expected revenue forecasts, sluggish cloud growth in AWS, supply chain issues, and increased competition in the cloud computing space. Despite these challenges, Amazon's strong earnings and revenue growth, as well as its continued investment in AI technology, suggest that its overall growth trajectory remains positive. Investors should closely monitor the company's progress and the broader market trends to make informed decisions about their portfolios.