Amazon’s disappointing guidance overshadows a strong close to 2024

The news: Amazon’s faster-than-ever delivery speeds—including over 65% more items supplied to US Prime members the same day or overnight than in Q4 2023—helped the retail giant best analysts’ expectations in Q4.

However, its weak outlook cast a shadow over those results as the retailer sees headwinds ahead.

The numbers:

• Revenues rose 10.5% year over year (YoY) to $187.79 billion, outpacing LSEG’s forecast of $187.30 billion.
• North America retail sales grew 9.5% YoY, with record results during Black Friday and Cyber Monday sales events that contributed to a holiday season that Amazon called its “most successful yet.”
• Advertising revenues rose 18% YoY to $17.29 billion, slightly short of the $17.4 billion expected.
• Earnings per share of $1.86 were up 86% YoY, well ahead of the $1.49 expected.

First, the bad news: The company expects Q1 sales to range between $151 billion and $155.5 billion, short of the $158.5 billion analysts expected.

• The low end of that range would be Amazon’s slowest growth since it went public in 1997.
• Amazon told CNBC it expects an “unusually large, unfavorable impact” from foreign exchange rates totaling $2.1 billion, or 1.5%. However, even excluding FX effects, the company would still fall short of expectations, signaling broader challenges ahead.

Now the good news: Despite the headwinds, there’s plenty to be bullish about.

• CEO Andy Jassy’s efforts to cut costs by shuttering experimental and unprofitable initiatives such as contactless tech at its Amazon Fresh and Whole Foods grocery stores are paying off in strong bottom-line results.
• Amazon is winning ecommerce share in everyday essentials like health and personal care, thanks to its relentless focus on speed. The company delivered over 2 billion essential items in the US within a day last year—a 50% YoY increase—helping consumers feel more comfortable ordering items like toothpaste and toilet paper online.
• These sales are important to Amazon’s growth, especially as economic uncertainty looms. Nearly one-third (31%) of US consumers would prioritize spending on essential items if tariffs or a trade war drove up prices on their regular purchases. By locking in shoppers now, Amazon is positioning itself as their go-to retailer—no matter the economic climate.
• Prime Video programming like “Red One,” “Beast Games,” and “Thursday Night Football” are shattering streaming records, providing a lucrative advertising revenue source.

Our take: While Amazon isn’t the first retailer to issue cautious guidance, it’s certainly the most significant. When the industry’s biggest player sees storm clouds ahead, it raises red flags for a broad swath of companies—suggesting that retail headwinds could be more widespread than expected.