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Amazon Q4 2024 Earnings Analysis: A Mixed Bag Leading to Stock Sell-Off
0:02 Q4 2024 Results: Net sales increased 10% to $187.8 billion. North America up 10%, International up 8%, AWS up 19% to $28.8 billion. Operating income increased to $21.2 billion (roughly 60-70% growth). AWS operating income increased by approximately 40%.
0:34 Full Year 2024 Results: Net sales up 11% to $638 billion. AWS sales up 19% to $107.6 billion (first year over $100 billion). Operating income almost doubled to $68.6 billion. Operating cash flow up 36% to $116 billion, a key metric.
0:45 Market Reaction: Amazon stock down 5% after hours due to weaker-than-expected Q1 2025 guidance (5-9% revenue growth) and operating income projections.
0:59 Q1 2025 Guidance: Net sales expected between $151 and $155.5 billion (5-9% growth). Operating income between $14 and $18 billion, not significantly higher than the previous year.
0:59 Cash Flow: Q4 operating cash flow increased 7%, which the market may perceive as low growth. Full-year operating cash flow up 36% to $116 billion.
0:36 Capital Expenditures: Q4 capex almost doubled year-over-year to $27.8 billion. Amazon spent $83 billion on capex for the full year 2024, exceeding Google's projected $75 billion for 2025. This significant capex spend may be contributing to market concerns.
0:36 AWS Performance: While AWS revenue hit $28.8 billion, operating expenses didn't increase as much, leading to about 50% operating income growth. AWS revenue growth has accelerated over the past year to 19%.
0:36 Cloud Competition: Google Cloud grew 30%, Microsoft Cloud 21%, and AWS 19%.
0:36 Stock Valuation: Amazon trades at 20.3 times operating cash flow, below its 10-year average of 27. The speaker believes the stock is fairly valued, potentially undervalued.
0:36 Stock Valuation (Cont.): DCF analysis suggests the market is pricing in a 10% annual growth rate for operating cash flow. The speaker believes Amazon can achieve 12% growth, driven by AWS and margin expansion.
0:36 Margin Expansion: Gross margin has risen from 22% in 2011 to 48.4% currently.
0:36 Conference Call Highlights: AWS growth will be "lumpy," but long-term prospects are positive. Amazon has its own chips with 30-40% better price performance than Nvidia. $27 billion in quarterly capex will be the run rate for 2025, potentially exceeding $100 billion annually.
0:36 Amazon's AI Stance: CEO stated AI is a once-in-a-lifetime opportunity bigger than the cloud and that spend will pay off.
0:36 Capacity Constraints: CEO noted constraints related to chips and power are causing a slower growth rate, set to dissipate H2 2025.
0:36 Final Opinion: Decent quarter, not a "blowout." Sees Amazon as fairly valued and a current "hold," would consider buying more shares if the stock price declines further.