Amazon recently projected a capital expenditure of around $230 billion in 2025, alongside Meta Platforms, in order to bolster its AI infrastructure. The retail giant's retail division saw a 7% increase in online sales, reaching $75.56 billion, which exceeded the expected $74.55 billion. Additionally, their advertising revenue grew by 18% to $17.3 billion, slightly below the analyst consensus of $17.4 billion.
In contrast, Amazon's cloud business faced challenges, with the first quarter of 2025 operating profit forecast falling short of expectations, ranging between $14 billion and $18 billion, missing the anticipated $18.35 billion. Despite this, the company's total revenue for the fourth quarter stood at $187.8 billion, slightly surpassing analysts' estimate of $187.3 billion. Amazon has significantly increased its spending to support the development of artificial intelligence.
CEO Andy Jassy attributed some of the slowdown in Amazon Web Services (AWS) to supply chain constraints, aligning with larger trends as cloud growth has decelerated for competitors like Microsoft and Google. AWS reported a 19% increase in revenue to $28.79 billion, slightly below the anticipated $28.87 billion, contributing to a substantial drop in Amazon's shares post-earnings announcement.
CFO Brian Olsavsky noted that Amazon's capital expenditure for 2025 is expected to mirror the fourth quarter of 2024, where $26.3 billion was spent, highlighting the mounting competition in AI, with companies like China's DeepSeek on the rise. Despite challenges, Amazon remains committed to AI development and is set to introduce its Alexa generative AI voice service, previously delayed due to quality concerns.
The market responded to Amazon's cloud-related struggles and revenue forecast with a decline of up to 5% in share value during extended trading after the earnings report, causing a substantial market value loss of approximately $90 billion, before settling at a 4.2% drop. With industry giants like Microsoft and Google also noting cloud growth deceleration, investors have become cautious about Big Tech's extensive capital expenditures, particularly surrounding AI investments.
