Cloud computing and online retail behemoth Amazon (NASDAQ:AMZN) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 13.6% year on year to $213.4 billion. The company expects next quarter’s revenue to be around $176 billion, close to analysts’ estimates. Its GAAP profit of $1.95 per share was in line with analysts’ consensus estimates.
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Revenue: $213.4 billion vs analyst estimates of $211.6 billion (0.9% beat)
Operating Profit (GAAP): $24.98 billion vs analyst estimates of $25.08 billion (small miss)
EPS (GAAP): $1.95 vs analyst expectations of $1.96 (in line)
North America Revenue: $127.1 billion vs analyst estimates of $127 billion (small beat)
AWS Revenue: $35.58 billion vs analyst estimates of $34.85 billion (2.1% beat)
North America Operating Profit: $11.47 billion vs analyst estimates of $10.83 billion (6% beat)
AWS Operating Profit: $12.47 billion vs analyst estimates of $12.06 billion (3.3% beat)
Operating Margin: 11.7%, in line with the same quarter last year
Free Cash Flow Margin: 7%, down from 10.4% in the same quarter last year
Capex guidance: “we expect to invest about $200 billion in capital expenditures across Amazon in 2026” (>50% year-on-year increase)
Market Capitalization: $2.49 trillion
“AWS growing 24% (our fastest growth in 13 quarters), Advertising growing 22%, Stores growing briskly across North America and International, our chips business growing triple digit percentages year-over-year—this growth is happening because we’re continuing to innovate at a rapid rate, and identify and knock down customer problems,” said Andy Jassy, President and CEO, Amazon.
Amazon shows that fast growth and massive scale can coexist despite conventional wisdom. The company’s revenue base of $386.1 billion five years ago has increased to $716.9 billion in the last year, translating into an excellent 13.2% annualized growth rate.
Over the same period, Amazon’s big tech peers Alphabet, Microsoft, and Apple put up annualized growth rates of 17.2%, 14.8%, and 8.2%, respectively. This is an important consideration because investors often use the comparisons as a starting point for their valuations. When adjusting for these benchmarks, we think Amazon’s price is fair.
Quarterly Revenue of Big Tech Companies
Long-term growth reigns supreme in fundamentals, but for big tech companies, a half-decade historical view may miss emerging trends in AI. Amazon’s annualized revenue growth of 11.7% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.
Amazon Year-On-Year Revenue Growth
This quarter, Amazon reported year-on-year revenue growth of 13.6%, and its $213.4 billion of revenue exceeded Wall Street’s estimates by 0.9%. Company management is currently guiding for a 13.1% year-on-year increase in sales next quarter. Looking further ahead, sell-side This projection is admirable for a company of its scale and illustrates the market sees some success for its newer products.
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Many investors understand that Amazon’s e-commerce business caps its gross margin, which averaged 46.8% over the last five years. The company lags behind its pure-play tech peers because it sells many commoditized goods online where it must acquire and hold physical inventory.
What the market debates, however, is where Amazon’s long-term operating profitability could ultimately settle. Sure, its five-year margin of 7.6% was mediocre, but it rose by 5.9 percentage points thanks to leverage on the fixed costs in its consumer-facing businesses and the highly profitable AWS segment becoming a larger portion of its revenue. Our question is if Amazon’s momentum can continue and result in a mid-to-high teen percentage margin somewhere down the line.
Amazon Gross and Operating Margins (GAAP)
The company’s North America segment holds the keys to this answer. Throughout the years, Amazon has made huge investments to not only attract hoards of customers into its ecosystem but also retain them. Some areas of focus in this effort included its unmatched delivery network and video streaming content.
Bulls will argue that Amazon can afford to ease up and begin riding its investments of the last two-plus decades. Wall Street seems to agree somewhat and is projecting its trailing 12-month operating margin of 11.2% to reach 12.8% in the coming year. Combined with its performance over the last few years, this suggests Amazon’s long-term profitability could go much higher, potentially leading to earnings and a stock price that follows.
It was encouraging to see Amazon narrowly top analysts’ revenue expectations this quarter, and the beat in Amazon Web Services was a bright spot. And while operating profit missed, all-important AWS segment operating profit beat. On the other hand, its operating income guidance for next quarter missed. Additionally, the company guided to $200 billion of capex in 2026, a more than 50% increase compared to 2025. Overall, this was a mixed quarter with the spending forecast spooking the markets. The stock traded down 5.5% to $210.70 immediately after reporting.
The latest quarter from Amazon’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
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