TLDR
- Amazon stock fell 10% Thursday after posting Q4 earnings of $1.95 per share, missing the $1.97 Wall Street estimate despite beating on revenue.
- AWS cloud unit delivered $35.58 billion in revenue, surpassing $34.93 billion forecast with operating margins climbing to 35%.
- The e-commerce giant announced $200 billion in 2026 capital spending, crushing analyst expectations of $148.86 billion for the year.
- CEO Andy Jassy plans to double AWS computing capacity again by end of 2027 to capture growing AI infrastructure demand.
- Q1 revenue guidance of $173.5-$178.5 billion disappointed investors while company moves forward with 16,000 job cuts.
Amazon stock plummeted Thursday evening following quarterly results that spooked Wall Street. Shares dropped as much as 10% in extended trading.
The company reported adjusted earnings of $1.95 per share for the fourth quarter. That missed the FactSet consensus of $1.97 per share.
Revenue came in at $213.4 billion for the period. The figure exceeded analyst expectations of $211.4 billion.
The stock decline focused on Amazon’s unprecedented spending plans. Management forecast $200 billion in capital expenditures for 2026, blowing past the $148.86 billion Street estimate.
AWS Shines Despite Parent Company Miss
Amazon Web Services posted standout quarterly numbers. The cloud division generated $35.58 billion in revenue, beating the $34.93 billion consensus.
Revenue growth for AWS hit nearly 24% compared to last year. The unit represents roughly 17% of Amazon’s overall revenue base.
AWS operating income reached $12.47 billion in the quarter. That crushed the $11.91 billion analyst forecast and accounts for most company profits.
Margins improved at the cloud business. AWS expanded operating margins to 35% from 34.6% in the third quarter.
CEO Andy Jassy highlighted capacity additions on the earnings call. AWS added close to 4 gigawatts of computing capacity last year, double its 2022 levels.
“We expect to double it again by the end of ’27,” Jassy told analysts. The expansion targets booming AI workload demand.
Spending Plans Trigger Selloff
The massive capex guidance drove the after-hours stock drop. Jassy said most spending will fund AI infrastructure at AWS.
“We just have a lot of growth, a lot of demand,” the CEO explained. Some investment will also support unexpectedly strong core workload growth.
Jassy expressed confidence in returns despite the spending surge. “I’m very confident we’re going to have strong return on invested capital here,” he said.
The cloud market is getting more competitive. Google Cloud grew revenue 48% last week, its fastest rate since 2021. Microsoft’s Azure posted 39% growth.
AWS introduced new AI capabilities during the quarter. The division launched Nova Forge for custom model training and announced a $38 billion partnership with OpenAI.
Forward Guidance Falls Short
Amazon projected first quarter revenue of $173.5 billion to $178.5 billion. The midpoint came in below the $175.6 billion analyst consensus.
The company continues workforce restructuring announced last month. Amazon is cutting 16,000 corporate roles to reduce management layers.
UBS analyst Stephen Ju maintained his Buy rating this week. He set a $311 price target and called Amazon a “coiled spring” based on AWS prospects.
Microsoft brought nearly one gigawatt of capacity online in Q4, CEO Satya Nadella said last week. Amazon’s 4 gigawatt addition demonstrates its infrastructure scale advantage.
The job cuts aim to streamline operations and eliminate bureaucracy. Management views the restructuring as necessary for long-term efficiency.
