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Amazon Can't Keep Up With A Demand; Shares Fall on Earnings Miss
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February 6, 2025
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4:11Now PlayingAmazon.com Inc. warned investors that it could face capacity constraints in its cloud computing division despite plans to invest some $100 billion this year, with most of the money going toward data centers, homegrown chips and other equipment to provide artificial intelligence services.
Chief Executive Officer Andy Jassy, determined for Amazon to become an AI supermarket, is spending big to retain the company’s edge in cloud-computing services. Still, he warned growth would be “lumpy” and hinted Amazon could face capacity issues related to delays in getting hardware and not having sufficient electricity.
“It is true we could be growing faster were it not for some of the constraints on capacity,” Jassy said on a conference call Thursday after the release of fourth-quarter results.
The concerns echo those of rival Microsoft Corp., which last week said its cloud sales growth was hurt because it didn’t have enough data centers to handle demand for its AI products.
Jassy said the supply of chips — from third parties and Amazon’s own chip design unit — and power capacity are limiting the ability of Amazon Web Services to bring new data centers online. Those constraints will likely ease in the second half of 2025, he said.
Bloomberg's Poonam Goyal breaks down why Amazon's net sales were down and the potential impact US tariffs on China could have on Amazon's forecast as the retail giant reports first quarter earnings.
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.
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 3.5% in extended trading after closing at $238.82 in New York. The stock has gained 8.9% so far this year after a 44% jump in 2024.
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