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Last week, Amazon (Nasdaq: AMZN) announced its fourth quarter results that surpassed market expectations. However, its stock slumped following a weak outlook.

Amazon’s Financials

Amazon’s fourth quarter revenues grew 10% to $187.8 billion, exceeding analyst estimates of $187.3 billion. Net income increased to $20 billion or $1.86 per share, compared with net income of $10.6 billion, or $1 per share a year ago. Analysts estimated EPS of $1.49 per share.

By segment, Net Product sales grew 7% to $82.2 billion and Net Service sales grew 13% to $105.5 billion.

Revenues from Amazon Web Services (AWS) increased 19% to $28.8 billion, in line with analyst estimates. Advertising services revenue grew 18% to $17.3 billion, narrowly missing analyst estimates of $17.4 billion. 

Online stores revenue grew 7% to $75.5 billion. Subscription services revenues grew 10% to $11.5 billion. Physical stores revenue grew 8% to $5.6 billion. Revenue from third party sellers grew 9% to $47.5 billion.

North American sales grew 10% to $115.6 billion, while international sales grew 8% to $43.4 billion.

For the full year, revenue increased 11% to $638.0 billion. North America sales grew 10% to $387.5 billion. International sales grew 9% to $142.9 billion. AWS segment sales grew 19% to $107.6 billion.

Amazon expects first quarter revenues of $151-$155.5 billion, or a growth rate of 5%-9%. Analysts estimate revenues of $158.5 billion.

Amazon’s AI Business

Amazon has a multibillion-dollar annualized revenue run rate business in AI that is growing at triple-digit percentage year over year. However, it could be growing faster if its capacity wasn’t constrained. 

Therefore, despite the disappointing outlook, the company has raised its capex targets. It didn’t give a precise forecast but said the $26.3 billion of capex in Q4 is representative of its 2025 capital investment rate. This would amount to nearly $105 billion, up 35%. The vast majority of that capex spend is on AI for AWS. 

During the earnings call, CEO Andrew Jassy said that the company is collaborating with Anthropic to build Project Rainier, a cluster of Trainium2 Ultra servers containing hundreds of thousands of Trainium2 chips. Trainium3 is expected to preview later this year.

During the quarter, Amazon announced a new Bedrock Marketplace, where customers can choose from over 100 popular models including DeepSeek, Luma AI, and poolside. 

Bedrock also includes Nova, its own family of foundation models that compare favorably in intelligence against the leading models in the world, but offer lower latency, lower price, and integration with key Bedrock features like fine-tuning, model distillation, knowledge bases, and agentic capabilities. Thousands of customers are already using Nova, including Deloitte, SAP, Robinhood, Palantir Technologies, Dentsu Digital, AppFolio, Fortinet, Trellix, 123RF, Envato, Pattern, and Ativion.

CEO Jassy also said that they were impressed with what DeepSeek has done. They were impressed with some of the training techniques, primarily in flipping the sequencing of reinforcement training — reinforcement learning being earlier and without the human-in-the-loop.

Amazon isn’t the only Big Tech company to include DeepSeek in their marketplace. Microsoft has also adopted a similar approach. DeepSeek’s latest AI model has been made available on Azure computing platform.

Its stock is trading at $228.49 with a market capitalization of $2.4 trillion. It touched a 52-week high of $242.52 early this month before its results. It had fallen to a 52-week low of $151.61 in August last year.

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