On February 7th, Amazon shared its financial results for the fourth quarter of 2024, which sparked a noteworthy reaction in the stock marketFollowing the release, Amazon's stock price experienced a significant drop of over 4% during after-hours trading, primarily due to the company's outlook for the upcoming quarter falling short of analyst expectations.

The financial report revealed that Amazon achieved a 10% increase in net sales, reaching $187.8 billion for Q4 2024. This performance corresponds with a remarkable profit surge, as the company's net income for the quarter climbed to $20 billion, marking an impressive 88.7% increase from the $10.6 billion reported in the fourth quarter of 2023. Despite this growth, forecasts for Q1 2025 indicated that net sales could range between $151 billion and $155.5 billion—a modest growth of 5% to 9% compared to the first quarter of 2024, drastically lower than the $158.5 billion anticipated by analysts.

Amazon's core business unit, Amazon Web Services (AWS), also showed a healthy performance, generating $28.8 billion in net sales during the same quarter, reflecting a growth of 19%, an improvement from the previous year's 13% increase

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During the earnings call, Andy Jassy, President and CEO of Amazon, highlighted the company's advancements in artificial intelligence, such as the introduction of the Trainium2 AI chip and a foundational model branded Amazon NovaHe elaborated on the expansive new models and features developed within Amazon Bedrock, asserting, "While these advantages typically take months to be realized by customers and enterprises, they are substantial driving forces in this emerging technological landscape."

In line with other leading tech firms, Amazon is doubling down on its infrastructure investments to bolster the growth of AI technologies and cloud servicesIn Q4, Amazon reported capital expenditures of $26.3 billion, with projections for 2025 capital expenditures expected to hit $100 billionBrian Olsavsky, Amazon's Chief Financial Officer, stated that most of this spending would be aimed at supporting the increasing demands of technological infrastructure, primarily associated with AWS

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According to Olsavsky, Amazon intends to further invest in AI services and the technological infrastructure that supports its North American and international divisions, while also enhancing its logistics network to accommodate business growth, speed up delivery times, and reduce service costs.

During the earnings call, discussions also revolved around the topic of lowering AI operational costs, where Jassy expressed his admiration for the achievements of DeepSeek, particularly in training technology that has revolutionized the sequence of reinforcement learning—a process that no longer requires human involvement in its early stagesHe mentioned that the costs linked to AI inference would also decline, marking a positive development for technology companies.

The fourth quarter is traditionally recognized as a peak shopping season, encompassing events like Prime Day and Black Friday

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Reflecting on last year's shopping season, Jassy proclaimed, "The 2024 holiday shopping period has been Amazon's most successful quarter to date."

Considering the current competitive landscape of e-commerce, where consumers are increasingly prioritizing low-priced goods, Amazon is strategically planning to offer more everyday essentialsJassy previously noted, “As consumers exercise caution in their spending, we continue to drop prices and expedite shipping, and we have seen this resonate with customers.” Compared to Q4 2023, the number of products delivered to US Prime members on the same day or within a day surged by over 65% in Q4 2024.

Amazon is also actively working on reducing operational costsIn the past year, the company has made hundreds of changes to its US network and opened more than 15 inbound sorting facilitiesWhile the restructuring is still in its relatively early phases, Amazon has successfully boosted its distribution capabilities across various fulfillment centers by 25%, enabling quicker processing and delivery of shipments to customers

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These changes are expected to further enhance inventory layout, decrease delivery times, save on shipping costs, and increase the volume shipped per package.

However, Amazon is not without its challengesIt currently faces investigations regarding possible monopolistic practices, along with intensified market competition.

In April of last year, the UK's competition watchdog announced an inquiry into the investments made by Microsoft and Amazon in artificial intelligence firms, citing concerns that such collaborations could grant major tech firms undue control over potential competitors and suppress competition.

Additionally, Amazon is wrestling with antitrust lawsuits filed by online clothing retailer Zulily, claiming that Amazon has enforced punitive measures against third-party sellers offering lower prices on competing platforms, thereby maintaining an unlawful monopoly in the e-commerce sphere.

In the realm of e-commerce, Amazon also contends with competitors like Temu and SHEIN, which leverage direct-from-factory supply chains to deliver affordable goods

A report released by Probolsky Research in August indicated that during the ongoing price wars directed at US consumers, Temu emerged as a formidable competitor against Amazon, with 76% of respondents affirming that Temu was cheaper than AmazonHowever, it's interesting to note that 81% of respondents did acknowledge that Amazon offered faster delivery.

In response to this competitive pressure, Amazon has shown acute awareness of potential risksThroughout the past year, the company has actively pursued aggressive pricing strategies, including lowering commissions and introducing initiatives like "Amazon Haul" to encourage shopping.

For cross-border e-commerce, attracting and retaining merchants has become a critical focal pointRecently, Amazon Global Selling unveiled its strategic priorities for 2025, which encompass areas of innovation support, opportunity expansion, and local empowerment