Breaking Down Mag 7 Earnings: Good or Bad?

Finance
ThePostMaster
February 7, 2026
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11
16 minutes read

Amazon AMZN missed EPS estimates in its December-quarter report, but the business is otherwise literally firing on all cylinders.

The market’s negative reaction to the Amazon report wasn’t due to the EPS miss, but rather to management’s eye-popping capital spending budget for 2026, which coincided with renewed worries about the broader AI space and growing fears that this new technology could seriously erode the earnings power of legacy technology businesses like software.

The market’s reaction to Amazon is broadly in the same category as Alphabet’s GOOGL after its quarterly release, with the severity of Amazon’s ‘punishment’ reflecting investors’ shock at learning of management’s AI plans. Amazon plans to spend $200 billion in capital expenditures in 2026, up from $132 billion in 2025 and $83 billion in 2024. Amazon’s operating cash flows modestly exceeded its $132 billion capex outlays in 2025, but the company’s 2026 capex budget will most likely exceed its operating cash flows.

Before we learnt of these lofty spending plans, many in the market expected 2026 to be the capex peak for Amazon (Alphabet and others). But management’s commentary about the mission-critical nature of these outlays likely means that it may be premature to declare peak capex. Amazon shares are now down -8.8% over the past year, lagging the broader market’s +15.8% gain and Alphabet’s impressive +74.1% rise.

Amazon is doing great in its core businesses, with its cloud unit enjoying accelerating growth and coming out with the best growth in three years. Revenues in Amazon Web Services (AWS) increased +24% in 2025 Q4, which compares to year-over-year growth rates of +20% in Q3, +19% in Q2, and +17% in Q1. Backlog for the business increased +40% from the same period last year to $244 billion, with management describing a robust demand environment.

While Amazon remains the cloud leader, the Alphabet report showed accelerating momentum at the search giant’s Google Cloud business. Revenues for Google Cloud increased +48% from the same period last year in 2025 Q4, which compares to growth rates of +35%, +32%, and +28% in Q3, Q2, and Q1, respectively. The strong cloud gains at Amazon and Alphabet put the spotlight on Microsoft’s lack of momentum in this key business area.

At this stage in the Q4 reporting cycle, Nvidia NVDA is the only Mag 7 member that has yet to report December-quarter results. Nvidia is scheduled to report Q4 results on February 25^th, with EPS and revenues for the period expected to be up +70.8% and +66.7% from the same period last year, respectively.

Combining the actual results for the 6 Magnificent 7 members that have reported already with estimates for Nvidia, total Q4 earnings for the group are expected to be up +24.2% from the same period last year on +18.9% higher revenues, which would follow the group’s +28.3% earnings growth on +18.1% revenue growth in 2025 Q3.

The chart below shows the group’s blended Q4 earnings and revenue growth relative to what was achieved in the preceding period and what is expected in the coming three periods.