Amazon's plans to increase spending spook investors
NEW YORK
The Spheres at Amazon headquarters are pictured in Seattle, Washington.
Amazon sales surged 14 percent during the fourth quarter, helped by strong holiday spending and a better-than-expected growth in its prominent cloud computing unit.
But shares fell 11 percent in after hours trading on Feb. 5 as investors appeared to be spooked by the Seattle-based tech company's plans to increase capital spending by nearly 60 percent to $200 billion from last year's $128 billion as it sees opportunities in artificial intelligence, robots, semiconductors and satellites. The company's fourth-quarter profits also were slightly below analysts' projections.
Wall Street analysts were expecting capital spending to rise to around $147 billion this year, according to FactSet.
Amazon's CEO Andy Jassy told investors on the call following the earnings release that it anticipates strong long-term return on the invested capital.
The results come as Amazon is slashing about 16,000 corporate jobs in the second round of mass layoffs for the e-commerce company in three months. Amazon said in an emailed statement last week that AI was “not the reason behind the vast majority of these reductions.” Rather, the cuts had more to do with eliminating layers to drive speed.
Amazon is also under pressure to shore up confidence that its computing arm Amazon Web Services is just as powerful as Microsoft’s Azure and Google’s Google Cloud platform.
Meta, Apple and other Big Tech firms are expected to ramp up their spending on artificial intelligence this year. After investing $91 billion into capital expenditures devoted mostly to AI, Alphabet said Wednesday that it expects to double down by spending another $175 billion to $185 billion this year.
Amazon reported net income of $21.2 billion for the three-month period ended Dec. 31. That compares with $20 billion in the year-ago quarter.
Revenue rose to $213.4 billion in the fourth quarter, compared with $187.8 billion in the year-ago period.