Amazon stock drops 3.3% premarket

Amazon's stock declined 3.3% in premarket trading following the company's fourth-quarter earnings report, which revealed slower-than-expected growth in its cloud computing division and a conservative first-quarter outlook. Amazon Web Services (AWS) posted a 19% revenue increase to $28.79 billion, slightly missing analysts' expectations of $28.87 billion, according to LSEG data.

The cloud performance follows similar disappointing results from competitors Microsoft Azure and Google Cloud, raising concerns about Big Tech's substantial AI investments, particularly as cheaper alternatives like China's DeepSeek emerge. Despite these challenges, Amazon's retail segment performed well, with online sales growing 7% to $75.56 billion, exceeding estimates of $74.55 billion.

CEO Andy Jassy announced plans to invest over $100 billion in generative AI services this year, surpassing last year's $78 billion expenditure.

For Q4 2023, Amazon reported earnings per share of $1.86 on revenue of $187.8 billion, surpassing analyst expectations. The North American segment showed strong performance with a 10% revenue increase to $115.6 billion and improved profit margins of 8%, up from 5.9% in the previous quarter.

Wall Street's response was mixed but generally positive, with 14 price target increases versus five decreases. The median price target now stands at $260, with Amazon's stock trading at $230.37 before market open.

The company's first-quarter sales forecast of $151-155 billion fell short of the $158 billion market expectation, contributing to investor concerns about the immediate return on AI investments.