Amazon (AMZN) announced its fourth-quarter results. The report showed that fourth-quarter revenue increased by 14% year-on-year to $213.4 billion, exceeding market expectations. Operating profit reached $25 billion, also surpassing both market consensus and the company’s previously provided guidance range. However, earnings per share under GAAP were $1.95, slightly below market expectations.
The company announced plans to invest approximately $200 billion this year in data centers and other equipment. This capital expenditure plan far exceeded analysts’ previous forecasts. Despite the overall robust performance, Amazon’s stock price experienced a significant decline in after-hours trading due to this news.
Amazon Web Services (AWS) was in the spotlight. In the fourth quarter, AWS revenue grew by 24% year-on-year to $35.6 billion, marking its largest quarterly increase in over three years and surpassing market expectations. The division’s operating profit reached $12.5 billion. Although AWS accounts for only 15% to 20% of the company’s total sales, it has historically been Amazon’s primary profit engine, supporting more than 60% of the company’s operating profit.
However, AWS’s profit margin slightly declined compared to the same period last year. Meanwhile, its competitors, Google Cloud (NASDAQ: GOOGL) and Microsoft’s Azure (NASDAQ: MSFT), achieved revenue growth of 48% and 39%, respectively, in the previous quarter. In the earnings call, Amazon CEO Andy Jassy emphasized AWS’s substantial revenue base, noting that achieving 24% growth under such circumstances carries a different significance.
E-commerce remains Amazon’s primary revenue source. In the fourth quarter, online store sales grew by 10% to $83 billion, exceeding analyst expectations and demonstrating its continued leadership in the highly competitive online retail market. Revenue in North America increased by 10% to $127.1 billion, while international revenue grew by 17% to $50.7 billion.
The advertising business maintained its rapid growth, with revenue rising by 23% year-on-year to $21.3 billion, slightly surpassing expectations and becoming a highlight of the holiday season. Amazon stated that it has introduced artificial intelligence tools in Prime Video to help marketers create advertisements more efficiently.
In physical retail, Amazon is undergoing strategic adjustments. The company recorded a $610 million impairment charge, primarily related to its physical stores such as Amazon Go and Amazon Fresh, and plans to gradually close these stores, with some to be converted into Whole Foods supermarkets. The company is expanding its Whole Foods store footprint and plans to build larger stores to enhance competitiveness.
The core concern for the market lies in the balance between Amazon’s aggressive capital expenditure plan and its profit growth prospects. The company stated that due to the need for significant investments in infrastructure such as data centers to meet the surge in demand for artificial intelligence, capital expenditure in 2026 is expected to reach as high as $200 billion. Jassy noted that the spending will primarily flow into AWS to support rapid growth, including both AI and non-AI workloads.
Investors are worried that the massive investment in AI may squeeze profits, with long-term returns remaining uncertain. Some analysts pointed out that Amazon’s projected capital expenditure growth rate exceeds the growth rate of AWS revenue, potentially trapping the company in a “construction race” that may not benefit anyone. Compared to other tech giants, Amazon’s spending plan is currently the most aggressive.
Looking ahead, Amazon expects its first-quarter revenue median to be $176.5 billion, higher than the general market consensus. However, the company forecasts its first-quarter operating profit median to be $19 billion, below market expectations. This outlook has further intensified market concerns about its profit prospects.
