‘Does Not Need A Recession To…’

As Amazon.com Inc. (NASDAQ:AMZN) is set to report its quarterly earnings on Thursday, Futurum CEO Daniel Newman and Chief Market Strategist Shay Boloor share their thoughts on what investors should watch out for.

Amazon’s earnings hinge on “two things staying true at once,” which are strong AWS demand and a resilient U.S. consumer. While performance has beaten expectations, the stock has lagged as lofty consensus leaves little room for upside surprises.

The upside case depends on sustained AWS tailwinds, mid-2025 margin pressure proving temporary, and investors accepting heavy capex if growth and margins remain durable.

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Capex and free cash flow are the main factors that decide how the stock reacts after earnings. The market is fine with higher spending if the management clearly shows AWS growth and strong margins and the AWS backlog and deals show demand outpacing supply.

But if spending stays high without clear gains in growth or profits, it risks a shift to a “capital drag” narrative. Investors see it as wasteful and “Amazon does not need a recession to sell off in that scenario.”

Futurum’s comments resonate with JPMorgan‘s analysis, which stated Amazon’s 2026 upside hinges on AWS, with AI-driven growth, accelerating cloud demand, and improving margins, replacing e-commerce as the core investment story.

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While AI is strengthening AWS’s growth story and operational efficiency on Earth, it is also pushing the physical limits of today’s data center infrastructure, prompting interest in space-based data centers. However, AWS CEO Matt Garman dismissed the idea, citing the prohibitive cost of launching heavy equipment into orbit and the lack of experience in building permanent, large-scale structures in space.

Reports suggest significant layoffs in the AWS division in the near future amid broader efforts to streamline operations. Amazon inadvertently alerted its cloud division employees to impending layoffs after mistakenly sending an internal email about upcoming “organizational changes.” The message, written by AWS senior vice president Colleen Aubrey, acknowledged the difficulty of the decisions.