Amazon Q4 Earnings Miss Estimates, Shares Slide on $200B Capex Plan

Amazon.com AMZN shares dipped in after-hours trading on Thursday after the company delivered fourth-quarter 2025 earnings of $1.95 per share, which increased 5% from the year-ago quarter but fell short of the consensus estimate by 1.52%.Net sales of $213.4 billion rose 14% year over year, which was ahead of management's guidance of $206-$213 billion and beat the consensus estimate by nearly 0.91%. Top-line growth was driven by robust momentum across all three segments, with particularly strong performance in Amazon Web Services (“AWS”).Excluding the $2.8 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 12% compared with the fourth quarter of 2024.The company's profitability metrics showed solid performance, with net income reaching $21.2 billion, up 6% year over year. However, operating income of $25 billion included three special charges totaling $2.4 billion, comprising $1.1 billion for the resolution of tax disputes associated with the stores business in Italy and a lawsuit settlement, $730 million in estimated severance costs, and $610 million in asset impairments primarily related to physical stores. Excluding these charges, operating income would have reached $27.4 billion.Amazon.com, Inc. Price, Consensus and EPS Surprise Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. QuoteTop-Line Details of AMZNProduct sales increased 9% year over year to $90 billion. Service sales jumped 17% from the year-ago quarter to $123.4 billion.By segment, North America revenues rose 10% from the year-ago quarter to $127.1 billion, but missed the consensus estimate by 0.05%. International revenues gained 17% year over year (11% excluding foreign exchange) to $50.7 billion and beat the consensus mark by 2.81%.AWS revenues rose 24% year over year to $35.6 billion, representing the fastest growth rate in 13 quarters and exceeding the consensus estimate. The figure beat the consensus mark by 1.58%. This acceleration was driven by both core and AI services as customers continue to modernize their infrastructure and migrate workloads to the cloud. AWS now has an annualized revenue run rate of $142 billion, adding $2.6 billion sequentially and nearly $7 billion year over year.Cloud growth continued to be a key focus for investors, particularly as the company faces intensifying competition from rivals Alphabet GOOGL-owned Google and Microsoft MSFT, which also reported quarterly results recently. While AWS accelerated to 24% growth, Microsoft Azure grew 39%, and Google's cloud revenues increased approximately 48% during the quarter.Strengthening relationships with third-party sellers remained a positive driver. In the reported quarter, sales generated by third-party seller services rose 11.2% on a year-over-year basis to $52.8 billion, which beat the Zacks Consensus Estimate by 1.04%. Worldwide paid units grew 12% year over year, representing the highest quarterly growth rate in 2025. Worldwide third-party seller unit mix reached 61% of paid units.Sales from robust advertising services increased 22% year over year to $21.3 billion, beating the consensus mark by 0.52%. The company added more than $12 billion of incremental advertising revenues in 2025 alone. The strong performance reflected successful AI-powered optimization of the platform and growing market share in digital advertising.Physical store sales rose 5% year over year to $5.86 billion in the reported quarter. The figure missed the consensus mark by 0.35%.The company's online store sales were $83 billion, up 10% year over year. The figure beat the Zacks Consensus Estimate by 0.71%.Prime Services and Consumer Business PerformanceThe company's retail and consumer business demonstrated strong engagement and innovation. Rufus, Amazon's AI-powered shopping assistant, was used by more than 300 million customers in 2025, with shoppers using Rufus showing 60% higher purchase completion rates. Rufus can now shop tens of millions of items in other online stores and make purchases on behalf of customers using its agentic "Buy For Me" feature.Customers used Lens, the AI-powered visual search tool, 45% more year over year to find products with a phone's camera, screenshot, or barcode.Amazon expanded its ultra-low-priced offering, Amazon Haul, to over one million items under $10, serving customers in more than 25 countries and regions. Everyday essentials grew nearly twice as fast as all other categories in the United States, representing one out of three units sold in Amazon stores.Amazon's Prime services demonstrated robust momentum in fourth-quarter 2025, with subscription services revenues reaching $13.1 billion, representing 14% year-over-year growth. The figure beat the consensus mark by 2.01%.Prime Video showed strong performance across multiple fronts. The fourth season of Thursday Night Football on Prime Video averaged more than 15 million viewers, a 16% year-over-year increase and the most-watched season ever. The Packers vs. Bears Wild Card Playoff game was the most-streamed NFL game in history with 31.6 million viewers. Amazon debuted NBA on Prime in more than 200 countries, with the Emirates NBA Cup Championship averaging 3 million+ viewers. Prime Video's global ad-supported audience grew to 315 million viewers from 200 million at the start of 2024.The company announced that Alexa+ is now available to all U.S. customers for $19.99 per month as a standalone subscription and free for Prime members.AWS and AI Innovations in Q4Amazon's AI initiatives gained significant momentum during the quarter. AWS' custom chips business, including Trainium and Graviton, now has a combined annual revenue run rate of more than $10 billion and is growing at triple-digit percentages year over year.Trainium2 is fully subscribed with 1.4 million chips landed and powers the majority of inference on Bedrock, a service used by more than 100,000 companies. Amazon Bedrock is now a multibillion-dollar annualized run rate business, with customer spend growing 60% quarter over quarter.Trainium2 powers Project Rainier, the world's largest operational AI compute cluster with 500,000+ Trainium2 chips, which Anthropic is using to train its industry-leading AI model, Claude. Trainium3 is now delivering production workloads and seeing strong demand, with nearly all of Trainium3’s supply of chips expected to be committed by mid-2026. Trainium4 is expected to start delivering in 2027.The company introduced Graviton5, AWS' most powerful and advanced CPU for cloud workloads. Graviton is up to 40% more price-performant than leading x86 processors and is used by more than 90% of the top 1,000 AWS customers.AWS added 20+ fully-managed models on Amazon Bedrock, including from Amazon Nova as well as Anthropic, Google, OpenAI, NVIDIA NVDA, and others. The company expanded its Nova model family and introduced Nova Forge, a first-of-its-kind service that empowers organizations to build their own optimized variants of Nova by pre-training the model with their own proprietary data.AWS announced new agreements with major enterprises, including OpenAI, Visa, the NBA, BlackRock, Perplexity, Lyft, United Airlines, DoorDash, Salesforce, U.S. Air Force, Adobe, Thomson Reuters, AT&T, and many more.This Zacks Rank #2 (Buy) company launched frontier agents for autonomous AI operations, including Kiro for coding tasks, AWS DevOps agents for operational issues, and AWS security agents for application security. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Delivery and LogisticsAmazon delivered at the fastest speeds ever for Prime members globally in 2025. In the United States, the company delivered nearly 70% more items same day than the year before, with Same-Day Delivery used by nearly 100 million customers. U.S. Prime members received over eight billion items the same or next day, up more than 30% year over year.The company expanded Amazon Now ultra-fast delivery (30 minutes or less) to various cities in India, Mexico, and the UAE, with testing underway in several U.S. and U.K. communities. Same-Day grocery delivery expanded to 2,300+ U.S. cities and towns. Amazon Pharmacy Same-Day Delivery is now available in 3,000+ U.S. cities and towns.Amazon LEO Satellite NetworkThe company made significant progress on Amazon LEO, its low-earth orbit satellite constellation for global broadband connectivity. Amazon has launched 180 satellites to date and plans more than 20 launches in 2026 and over 30 in 2027. The company unveiled LEO Ultra, an enterprise-grade customer terminal delivering simultaneous download speeds up to 1 Gbps and upload speeds up to 400 Mbps. Commercial rollout is expected later in 2026, with several enterprise customers, including AT&T, DIRECTV Latin America, JetBlue, and Australia's national broadband network, already signed.Operating DetailsOperating income came in at $25 billion compared to $21.2 billion in the fourth quarter of 2024. This figure included three special charges totaling $2.4 billion. Excluding these charges, operating income would have been $27.4 billion.North America segment operating income was $11.5 billion, up 24% from the year-ago quarter. International segment operating income came in at $1.0 billion. AWS segment operating income was $12.5 billion, up 17% from the year-ago quarter, with an operating margin of 35%, up 40 basis points year over year.Balance Sheet & Cash FlowAs of Dec. 31, 2025, cash and cash equivalents were $86.8 billion, up from $66.9 billion as of Sept. 30, 2025. Marketable securities totaled $36.2 billion as of Dec. 31, 2025, up from $27.2 billion in the previous quarter.Long-term debt was $65.6 billion at the end of the reported quarter, up from $50.7 billion at the end of the previous quarter.Amazon's cash flow generation remained robust, with operating cash flow increasing 20% to $139.5 billion for the trailing 12 months compared to $115.9 billion in the prior-year period.However, free cash flow decreased significantly to $11.2 billion for the trailing 12 months from $38.2 billion, driven primarily by a year-over-year increase of $50.7 billion in property and equipment purchases. This substantial capital investment reflects Amazon's aggressive expansion of AI infrastructure.The company plans to invest approximately $200 billion in capital expenditures in 2026, predominantly in AWS. That marks a steep rise from the $125 billion it spent in 2025. Investors reacted nervously to the announcement, sending Amazon’s stock down more than 11% in after-hours trading.GuidanceFor the first quarter of 2026, Amazon provided guidance reflecting continued growth expectations. The company anticipates net sales between $173.5 billion and $178.5 billion, representing 11% to 15% growth compared to the first quarter of 2025, with this guidance anticipating a favorable impact of approximately 180 basis points from foreign exchange rates.Operating income is expected to range between $16.5 billion and $21.5 billion compared to $18.4 billion in the first quarter of 2025. This guidance includes approximately $1 billion of higher year-over-year Amazon LEO costs as the company scales in 2026, as well as investment in quick commerce and sharper prices in its international stores business.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. 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