Amazon.com shares slipped Thursday after it projected weaker-than-expected sales for the first quarter, even as it spent a record amount on capital expenditure to build infrastructure for artificial-intelligence services.
The company’s net sales rose 10% from a year earlier to $187.79 billion for the three months through December. Its net income was $20 billion. Its sales were in line with analysts’ expectations, while its profit was higher than predicted.
Revenue from Amazon’s cloud-computing unit, Amazon Web Services, grew 19% to $28.79 billion, slightly lower than the $28.87 billion that analysts polled by FactSet had expected. Analysts said they were closely monitoring this number after disappointing cloud-computing results from Alphabet and Microsoft.
The company projected net sales to be between $151 billion and $155.5 billion, lower than the $158.56 billion that Wall Street was expecting.
Amazon stock — which has climbed around 40% in the past 12 months — fell around 3% in after-hours trading on Thursday.
The company’s capital expenditure for the quarter was $27.83 billion, its highest ever. Last year, Amazon said that it planned to spend around $75 billion on capital expenditure in 2024 and more in 2025 as part of a push to build generative AI services.
Top tech companies have been ramping up spending on the expensive chips, data centers and real estate needed to meet the rising demand for computing power for AI.
On Tuesday, Alphabet announced plans to invest $75 billion in capital expenditures this year. Microsoft’s total capital bill is expected to top $90 billion this calendar year, and Meta has said it plans to bump up its spending more than 60% to as much as $65 billion this year.
Some investors are starting to question whether the AI spending spree is prudent. U.S tech stocks tumbled last week after the surprise success of a new generative artificial-intelligence model from China. The free-to-use model from DeepSeek was built at a fraction of the cost of leading AI technology from the U.S. and has comparable performance.
Amazon Chief Executive Andy Jassy wants to make Amazon an AI leader. As the world’s largest cloud-service provider, Amazon is in a good position to profit from AI. The company has created special teams to drive generative AI innovation and has released a flurry of services, including an AI shopping assistant.
In its e-commerce business, Amazon has had to contend with new rivals such as Temu and Shein. Both of those companies offer low prices and source products extensively from China.
President Trump suspended a trade exemption known as the de minimis provision that Shein, Temu and other Amazon competitors have used to avoid import duties on low-value packages from China.
While Amazon might benefit from the change to the trade provision, the company isn’t immune to it. Many of Amazon’s sellers source their inventory from overseas, and in November the company launched Amazon Haul, a service that mails inexpensive products to customers from warehouses in China.
Separately, during the important holiday quarter, Amazon grappled with threats from one of the largest U.S. labor unions. The International Brotherhood of Teamsters tried to disrupt holiday deliveries to pressure Amazon to negotiate with its warehouse workers. At the time, the company said those attempts had little effect on its holiday deliveries.
This year, Amazon told its corporate staff to return to working in the office five days a week. Employees say the company’s strict return-to-office policy has been logistically challenging and has prompted some backlash.