Amazon Earnings Review Q4 2024

I started writing this post a long time ago, but there was always a more interesting topic to cover, so I never finished it the way I wanted. Now, almost few weeks before next earnings report it is time to do it.

While reading the report from the MAG7 company, there are many factors we need to consider in our thought process. Right now, the obvious topic is the U.S. tariffs imposed yesterday on "Liberation Day." However, let's cover that topic later in the post.

Amazon Q4 2024 financial results and highlights

$187.8 billion in the fourth quarter, compared with $170 billion in Q4 2023 is increase of around 10%. In North America sales are increased by 10% YoY and international segment increased by 8% in the same period. The biggest increase was made in AWS segment where Amazon is recording 19% YOY increase and is now howering just shy to $29 billion.

Free cash flow increased to $38.2 billion for the trailing twelve months, which is significant increase compared to $36.8 billion for the same period in 2023.

While this numbers look really impressive for itself I would like to mention few highlights of a company happened in last quarter:

• 65% more items to US Prime members delivered the same day or overnight than in Q4 2023
• Launched Amazon Haul, a new shopping experience in Amazon's US shopping app and mobile site, with ultra-low prices (this is Amazon answer to super-cheap China websites like Temu)
• Had the biggest Q4 for Kindle device sales in over a decade, with a new lineup of Kindles driving a 30% YoY increase in device sold
• New AWS agreements with the US army, Intuit, Paypal, Medtronic, Reddit and others

Guidance and developments during Q1 2025

Changes in global economic are influencing Amazon business in many extents. For the first quarter company is expecting to show growth between 5% to 9% which would be around $151 billion and $155 billion. From my perspective this guidance is very speculative. As we know world is preparing for crisis (still not for full stage recession) and it is not hard to tell that people will try to save more during times of uncertainty.

In the same time, Amazon is planning to launch its first production satellites for the Project Kuiper. Internet mega-constellation which is aiming to compete with Starlink project.

Also, company integrated conversational AI interface to their existing shopping app, this feature is called Rufus and Amazon is projecting that it will boost operating profits by $700 million in 2025.

Prime Day in 2025 will be extended to 4 days. This move aims to drive engagement while economic uncertainty, it is marketed as 10th anniversary deal, but, most probable reason for this extension is competitors extending their sales event.

US tariffs and Amazon

Amazon has a large number of sellers from China who distribute Chinese products through its network. This took a significant hit after the tariffs were introduced yesterday, causing the stock to drop 10% in the last 24 hours. This marks a total decline of approximately 27% from its all-time high (ATH) at the beginning of February.

This decrease brought the stock price down to levels last seen four years ago while also reducing its forward P/E to 27, making it relatively cheap compared to its previous average forward P/E of around 38.

At the same time, Amazon is a rapidly developing company. It has a massive customer base, both from businesses and individual consumers. Its position in the global market is well established, and its competitive moat is one of the strongest in the industry.

There is ongoing debate among investors about Amazon's lack of a dividend policy and its relatively small free cash flow for a company of its size. In my view, Amazon's future remains secure. We had seen similar stock price drops before and Amazon has never been the type of company focused on extracting maximum short-term profit from its customers. If we need to talk about dividend policy, it is typically adopted by companies that have moved past their growth phase, while Amazon is still hungry for a growth—and that is a good thing.

I set my entry price (EP) for this company a long time ago at $190. So, as you might expect, I am dollar-cost averaging (DCA) while the price remains below that level.