TLDR
- Amazon shares dropped 10% in after-hours trading Thursday following Q4 results that missed earnings expectations at $1.95 per share versus $1.97 consensus.
- AWS cloud division exceeded forecasts with $35.58 billion revenue and $12.47 billion operating income while margins improved to 35%.
- The company unveiled plans for $200 billion in 2026 capital expenditures, massively exceeding Wall Street’s $148.86 billion projection.
- Jassy committed to doubling AWS computing capacity by late 2027 as AI workload demand accelerates across the platform.
- First quarter revenue outlook of $173.5-$178.5 billion missed estimates while Amazon proceeds with 16,000 job cuts announced last month.
Amazon stock tumbled Thursday night after the company reported quarterly earnings that disappointed investors. Shares fell as much as 10% despite solid cloud business results.
The tech giant posted adjusted earnings of $1.95 per share for the December quarter. Analysts surveyed by FactSet had projected $1.97 per share.
Revenue hit $213.4 billion in the period. That figure surpassed Wall Street’s $211.4 billion estimate.
The selloff centered on Amazon’s eye-popping spending forecast. The company plans $200 billion in capital expenditures for 2026, dwarfing the $148.86 billion consensus estimate.
Cloud Business Delivers Strong Results
Amazon Web Services exceeded expectations across key metrics. The division posted $35.58 billion in revenue, topping analyst predictions of $34.93 billion.
Year-over-year revenue growth reached nearly 24% for AWS. The cloud unit now accounts for approximately 17% of total company revenue.
Operating income from AWS totaled $12.47 billion. That beat the $11.91 billion StreetAccount consensus and represents the bulk of Amazon’s profits.
The cloud division expanded operating margins to 35% from 34.6% last quarter. AWS continues driving profitability for the parent company.
CEO Andy Jassy emphasized infrastructure expansion during the earnings call. The company added almost 4 gigawatts of computing capacity in 2025, twice its 2022 capacity.
AI Infrastructure Spending Spooks Market
The $200 billion capex guidance sparked immediate investor concern. Jassy explained most funds will support AI infrastructure buildout at AWS.
“We just have a lot of growth, a lot of demand,” Jassy said. He stressed the investment targets both AI and faster-growing core workloads.
The CEO defended the spending strategy on the call. “I’m very confident we’re going to have strong return on invested capital here,” he stated.
Amazon plans to double AWS capacity again by end of 2027. The expansion aims to capture surging demand for artificial intelligence computing power.
Cloud competitors posted stronger recent growth numbers. Google Cloud reported 48% revenue growth, marking its fastest expansion since 2021. Microsoft’s Azure business grew 39%.
During the quarter, AWS launched Nova Forge for advanced AI model training. The company also secured a $38 billion infrastructure commitment from OpenAI.
Guidance and Restructuring Updates
Amazon forecasted Q1 revenue between $173.5 billion and $178.5 billion. The range’s midpoint trails the $175.6 billion analyst consensus.
The company moves forward with previously announced layoffs. Amazon plans to eliminate 16,000 corporate positions to streamline management and cut bureaucracy.
UBS analyst Stephen Ju reaffirmed his Buy rating this week with a $311 price target. He described Amazon as a “coiled spring” poised for AWS acceleration.
Microsoft CEO Satya Nadella said last week his company brought nearly one gigawatt of capacity online in Q4. Amazon’s 4 gigawatt addition in 2025 demonstrates its infrastructure lead.
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