Amazon earnings recap: Stock plunges as capex-spending plans blow away estimates
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Amazon earnings are in, and it's not looking good for the stock.
Investors were focused on the company's capex-spending forecast of $200 billion for the year, which came in well above the average analyst estimate of $146.11 billion.
"We're going to invest aggressively here. And we're going to invest to be the leader in this space," CEO Andy Jassy said on the company's earnings call on Thursday.
It overshadowed a report that was otherwise largely in line with forecasts. Net sales came in at $213.39 billion, compared to an estimate of $211.49 billion. The company's closely watched AWS cloud unit also came in slightly stronger than anticipated.
Earnings per share came in at $1.95, just below the $1.96 estimate. In terms of guidance, Amazon sees net sales of $173.5 billion to $178.5 billion, in line with Wall Street's expectation of $175.54 billion.
Jassy touted the AWS cloud unit's 24% year-over-year growth and its growing chip business.
"It's early days with what's possible here," he said of the chip business on the earnings call.
Jassy also pointed to Amazon's plans to increase its already fast shipping speeds, including through its 30-minute delivery tests in the US.
Amazon also gave more insight into costs after a recent spate of layoffs. Fourth-quarter operating income took a hit from $730 million in severance costs, as well as $610 million in asset impairments on its physical stores business and $1.1 billion to resolve a tax dispute in Italy.
The stock dropped sharply after hours, falling about 10% after dropping 5% during Thursday's session.
Amazon's stock is down 10% in after-hours trading as the call ends.
Jassy says that Amazon has added 3.9 gigawatts of computing power over the last 12 months. That's twice what AWS had in 2022, he adds.
Amazon expects to double its computing power again by the end of 2027, he adds.
Robotics is a big area for Amazon, Andy Jassy said.
He said Amazon has over 1 million robots in its fulfillment network, which bring cost efficiencies.
Andy Jassy said Amazon's approach to "quick commerce" includes the 30-minute delivery that it's testing in the US with Amazon Now.
In India, a country where Amazon already makes a lot of fast deliveries, customers that use fast delivery order from Amazon at "triple the frequency" that they did before, he said. Many of those orders include everyday essentials, he said.
Andy Jassy touted Amazon's improvements in delivery speed over the last three years.
He said, "the one thing I get stopped on the street most often about" is how quickly the company can get a package to a customer's door.
Andy Jassy said 300 million customers used Amazon's AI shopping assistant Rufus in 2025, and they were 60% more likely to complete a purchase.
Still, he said, the customer shopping experience needs to improve, considering many agents don't know your shopping history and get product details wrong.
"We have to collectively figure out a better customer experience," he said.
Jassy responded to a question about whether Amazon would consider expanding its partnership with OpenAI to help Amazon's AI efforts. The companies announced in November that they would work together.
Jassy said that Amazon has "a lot of respect" for OpenAI, and that Amazon wants "to continue to extend our partnership over time."
But he said there's room for more than just one player in the space.
"This AI movement is not going to be a couple companies," he said. "It's going to be thousands of companies over time."
Andy Jassy touched again on the prices of Amazon's custom chips, and mentioned that the company expects its Trainium 3 chip supply to be "committed by somewhere around the middle of this year."
He said there's more growth to come. "It's early days with what's possible here," he said.
"We're going to invest aggressively here. And we're going to invest to be the leader in this space," Andy Jassy said.
He added: "This isn't some sort of quixotic top line grab," saying that Amazon is confident the investment will pay off long term.
Mark Mahaney, Evercore ISI's internet research analyst, asked for details about Amazon's capex plans, including its plans to realize returns on those investments.
CFO Olsavsky said that Amazon sees "strong demand" for AWS' services. CEO Jassy said that most of Amazon's capex is focused on AI. "We just have a lot of growth, a lot of demand," he said.
Mark Mahaney at Evercore ISI has the first question.
Prime members received 8 billion items either the same day that they ordered them or the next day, CFO Brian Olsavsky said on the call. That's 30% more than in 2024.
Half of the items shipped were groceries and "everyday essentials," Olsavsky said.
He said the company would keep optimizing inventory to speed up delivery and launch robotics and automation to boost efficiency.
Jassy points to Amazon's grocery plans, including opening more Whole Foods stores and expanding its grocery delivery business. He also said Amazon wants to compete with rivals by "staying sharp on price."
Amazon Fresh, which Amazon said last week it would close, was meant to offer more middle-market groceries.
Jassy said Amazon's $200 billion in planned capital expenditures will predominantly be in AWS because "we have very high demand," he said.
"We're monetizing capacity as fast as we can install it," Jassy added.
Jassy said the cost of AI chips as a "significant impediment" to reducing inference costs. Amazon's own chips, such as its Trainium silicon, are meant to lower that cost, and "it's really taken off," he said.
Andy Jassy pointed to AWS's 24% revenue growth during the fourth quarter, saying that it's superior to a higher growth rate on smaller revenue, "which is the case with some of our competitors," he said.
CEO Andy Jassy, CFO Brian Olsavsky, and head of investor relations Dave Fildes are kicking it off with prepared remarks.
EMARKETER analyst Sky Canaves highlighted Amazon's solid retail sales growth during the holiday shopping season. (EMARKETER is a sister company to Business Insider.)
Even more notably, the retail business became more profitable in North America as Amazon delivered orders to shoppers faster, Canaves said.
Amazon's ads business, up 23% year over year to $21.3 billion in the quarter, also grew thanks to Prime Video, expanded DSP, and the company's AI ad tech, Canaves said.
Besides Amazon's "jaw-dropping" $200 billion capex plans, its custom chip business was a highlight for the fourth quarter, Zacks Investment Research stock strategist Ethan Feller said after the company reported earnings.
Together, Amazon's Trainium and Graviton chips now have an annual revenue run rate of over $10 billion and are "growing triple digits," Feller said.
"This is Amazon reducing its Nvidia dependency while improving margins, a critical competitive advantage if it scales," he said.
Amazon's higher-than-forecast capex and opex plans are a reminder that investing in AI is "testing balance sheets across Big Tech," Investing.com Senior Analyst Thomas Monteiro said after the company released earnings results.
While AWS continues to be a sales driver for Amazon, its investment plans show that the growth "will not come cheaply," Monteiro said.
"For Amazon, this quarter makes clear that AI scale is no longer about ambition — it's about balance-sheet endurance," he said.
The fact that many consumers are pulling back spending, hitting Amazon's retail business, doesn't help either, he said. Still, Amazon's e-commerce net sales rose 10% year over year to $82.99 billion in the fourth quarter, in line with Wall Street estimates.
Sales at AWS grew 24% year over year to $35.6 billion during the fourth quarter, beating Wall Street's 21% growth estimate.
That's "our fastest growth in 13 quarters," Andy Jassy said in the company's earnings release.
Shares of Amazon fell as much as 10% in after-hours trading after the company reported earnings that missed Wall Street estimates, and are now hovering around 8%.
The company also announced big spending plans, including its $200 billion capex plan for 2026.
Amazon's fourth-quarter operating income took a hit from $730 million in severance costs tied to layoffs, $610 million in asset impairments on its physical stores business, and $1.1 billion to resolve a tax dispute in Italy.
Amazon expects to spend about $200 billion in capex this year, CEO Andy Jassy said as the company reported earnings results.
That amount puts the company's spending plans ahead of Meta, Microsoft, and Alphabet-owned Google, each of which released capex plans that were above analysts' expectations.
"With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low earth orbit satellites, we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital," Jassy said in the company's earnings release.
Fourth quarter results
- Net sales $213.39 billion, estimate $211.49 billion (Bloomberg
Consensus) - Online stores net sales $82.99 billion, estimate $82.3
billion - Physical Stores net sales $5.86 billion, estimate $5.88
billion - Third-Party Seller Services net sales $52.82 billion,
estimate $53.16 billion - Subscription Services net sales $13.12 billion, estimate
$12.74 billion - AWS net sales $35.58 billion, estimate $34.88 billion
- North America net sales $127.08 billion, estimate $127.21
billion - International net sales $50.72 billion, estimate $49.74
billion - Third-party seller services net sales excluding F/X +10%,
estimate +11. - Subscription services net sales excluding F/X +12%, estimate
+10.4 - Amazon Web Services net sales excluding F/X +24%, estimate
+21% - EPS $1.95, estimate $1.96
- Operating income $24.98 billion, estimate $24.82 billion
- Operating margin 11.7%, estimate 11.7%
- North America operating margin +9%, estimate +8.51%
- International operating margin 2.1%, estimate 4.27%
- Fulfillment expense $30.83 billion, estimate $31.42 billion
- Seller unit mix 61%, estimate 61.5%
Sundar Pichai, the CEO of Google, said on Wednesday that supply constraints on compute power are his biggest concern right now. This may be where Amazon's cloud business is poised to win. It has the potential to bring more capacity online than any other hyperscaler over the next two years, Bernstein analysts posited in a note this week.
"We are in a supply-constrained environment for AI compute and AWS are world-class at bringing more compute capacity online," Bernstein analysts wrote. If that can translate directly into revenue for Amazon, the company could be set to rake in more new cloud dollars in 2026 than Google, Microsoft, or anyone else in the pack, they added.
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Amazon has increasingly been making deep investments in tech that uses its unrivaled shopping data to help brands advertise outside the Amazon platform. Its demand-side platform has secured key media partnerships with Netflix and Disney, helping Amazon go head-to-head with rival DSPs from Google and The Trade Desk. We'll be looking out for details on the call about how these off-Amazon pushes are serving as a flywheel for its ad business overall.
Selling ads to merchants jockeying for the best positions on Amazon.com has long been a lucrative and reliable business for Amazon. The 2024 introduction of ads on Prime Video then opened up the spigot for streaming budgets. Advertising has consistently been Amazon's fastest-growing major division in recent quarters — or at least up there with AWS. Analysts at Zacks Investment Research expect Amazon's ad business to jump at least another 20% year over year in Q4.
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Investors will be listening for any new details on today's call about Amazon's grocery strategy.
Last week, the company said it would shutter about 60 Amazon Fresh stores and 15 Amazon Go convenience stores. The locations showcased Amazon's retail technology, including Just Walk Out and its Dash Carts, though those options didn't resonate with customers as much as Amazon hoped, store workers told me.
The Fresh closures represent a pivot for Amazon's grocery business. Instead of continuing with Fresh, a brand that Amazon built from scratch, it's opening more Whole Foods stores and doubling down on its grocery delivery options.
CEO Andy Jassy has pointed to improvements in Amazon's delivery speeds on recent earnings calls. The company has indicated in the last few months that it's trying to make itself even faster — and compete with retail rivals like Walmart.
The company is testing a 30-minute delivery option called Amazon Now in parts of Philadelphia and Seattle, it said in late 2025.
Amazon Now focuses on household essentials, such as milk and pet food, though it's not yet clear how Amazon will fit this option into its larger retail and delivery strategy. I debated its merits — and its perils — with my retail-focused colleague, Dominick Reuter.
Noah Berger/Getty Images for Amazon Web Services
Big Tech is spending big bucks on AI infrastructure, and Wall Street has started to question when those investments might pay off.
Amazon said in its previous earnings report that it expected capex of about $125 billion for 2025. Lee Sustar, a VP principal analyst at Forrester, told Business Insider that this expenditure "will loom large" in its full-year earnings.
"Amazon will have to convince investors of the wisdom of its strategy to keep spending huge sums to remain the leading cloud provider by market share in the AI-native cloud era," Sustar said.
Amazon has been positioning its in-house Trainium chips as an alternative to Nvidia's GPUs for AI training. In its previous earnings call, Andy Jassy said its Trainium 2 chips are now a "multibillion-dollar" business, growing 150% quarter over quarter.
However, as my colleague Eugene Kim reported in November, some startups have found Amazon's chips lag behind Nvidia's GPUs in performance. Amazon doesn't break out Trainium revenue, so investors will be watching for any comments about the adoption of its custom chips.
Thos Robinson/Getty Images for The New York Times
Amazon remains a top pick for Mizuho, which sees it as a winner of the online advertising boom. Analyst Lloyd Walmsley also thinks it stands to benefit from ongoing demand both for its AI services and its e-commerce business.
"As GenAI compute demand increasingly shifts to inference this plays to Amazon's strength and should help further boost revenues at AWS," he noted. "On retail, we see ongoing cost-to-serve improvements from more automation in fulfillment centers and continued improvement in logistics architecture, aided by rapid growth in advertising driving improving retail margins."
UBS analyst Stephen Ju and his team increased their estimates for both AWS growth and Amazon's capex, citing the company's plans to double capacity by 2027.
"As 4Q25 results marks the second quarter of AWS acceleration, we expect investor conviction to continue to rise and drive outperformance as capital continues to rotate into AMZN shares," Ju stated in a note to investors.
He added that his team expects Amazon to benefit from its investments in areas such as gross merchandise volume, advertising, and data, which are expected to help increase its free cash flow.
Justin Sullivan/Getty Images
Deutsche Bank analysts aren't expecting Amazon's Q4 earnings report to quickly juice the stock's performance, but they do anticipate a positive quarter overall, particularly in e-commerce demand and AWS-driven revenue growth.
"While we don't expect 4Q earnings to be the magic bullet that changes these fortunes, we do expect another positive earnings outcome to continue to chip away at this underperformance and believe Amazon can be one of the largest outperformers in our coverage in 2026," stated analyst Lee Horowitz.
While JPMorgan analysts remain bullish on Amazon heading into earnings, they note some concerns regarding Amazon's position and strategy when it comes to AI. They find the recent AWS price increases encouraging, though, as they indicate strong demand.
"We remain bullish on AWS growth acceleration driven by core cloud growth & ramping AI contribution led by Project Rainier, Trn ramp, & new partnerships," they wrote.
The analysts added, though, that despite some concern, AWS' growth and the company's cost discipline should support strong free cash flow growth in the coming year, even as Amazon ramps up AI capex.
Noah Berger/Getty Images for Amazon Web Services
BofA analyst Justin Post expects Amazon to come in slightly above Wall Street estimates on key metrics, predicting revenue of $213 billion and EBIT of $26 billion. He also thinks that AWS growth will accelerate in 2026, helping Amazon regain some momentum.
"We expect 22% y/y AWS growth (above Street at 21% and an accel from 20% in 3Q) as greater capacity drives incremental sales, and we think investors could also be around 22% y/y," he said.
Fourth quarter
- Net sales estimate $211.49 billion (Bloomberg Consensus)
- Online stores net sales estimate $82.3 billion
- Physical Stores net sales estimate $5.88 billion
- Third-Party Seller Services net sales estimate $53.16 billion
- Subscription Services net sales estimate $12.74 billion
- AWS net sales estimate $34.88 billion
- North America net sales estimate $127.21 billion
- International net sales estimate $49.74 billion
- Third-party seller services net sales excluding F/X estimate
+11.2% - Subscription services net sales excluding F/X estimate +10.4%
- Amazon Web Services net sales excluding F/X estimate +21%
- EPS estimate $1.96
- Operating income estimate $24.82 billion
- Operating margin estimate 11.7%
- North America operating margin estimate +8.51%
- International operating margin estimate 4.27%
- Fulfillment expense estimate $31.42 billion
- Seller unit mix estimate 61.5%
FIRST QUARTER
* Net sales estimate $175.54 billion
* Operating income estimate $22.24 billion
* Capital expenditure estimate $34.81 billion