Amazon (AMZN) Earnings: The $700 billion milestone and the AI crossroads

• Analysts expect a record-breaking Q4 2025, with revenue projected to hit approximately $211.3B and EPS at $1.97, driving Amazon to surpass $700 billion in annual revenue for the first time
• The primary weight on the stock is the "Stifling" capital expenditure trajectory
• Amazon Web Services (AWS) remains the crown jewel (expected to reach ~$35B, 21-22% growth) and investors are looking for evidence of continued reacceleration
• The stock's immediate future rests on the "AI narrative"

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As Amazon (NASDAQ: AMZN) prepares to report its fourth-quarter 2025 financial results on Thursday, February 5, 2026, Wall Street is bracing for a potential milestone: the retail and cloud giant is expected to surpass $700 billion in annual revenue for the first time in its history.

However, while the top-line numbers look robust, the stock's recent "flat" performance compared to the broader S&P 500 suggests that investors are demanding more than just growth they want clarity on the costs of the AI arms race.

The consensus among analysts points to a record-breaking holiday quarter driven by strong consumer demand and a reacceleration in cloud services:

Revenue: Expected to hit $211.3 billion to $211.6 billion, representing roughly 13% year-over-year growth. This aligns with Amazon's own guidance of $206 billion to $213 billion.

Earnings Per Share (EPS): Consensus estimates sit at $1.97 to $1.98, a modest 6% increase from the $1.86 reported in Q4 2024.

AWS Revenue: Expected to reach approximately $35 billion, a 21-22% increase year-over-year.

AWS and the AI Efficiency Narrative Amazon Web Services (AWS) remains the crown jewel, contributing nearly 20% of total revenue but a far higher percentage of operating profit. After a period of slowing growth in 2023, AWS has reaccelerated, hitting 20% growth in Q3 2025. Investors will be looking for a continuation of this trend, specifically focusing on how quickly Amazon can convert its $200 billion backlog into realized revenue.

A critical sub-plot is the adoption of Amazon’s in-house AI chips, Trainium and Inferentia. As Amazon seeks to reduce its dependency on Nvidia and improve margins, evidence of broader customer adoption beyond Anthropic (which recently scaled to nearly 500,000 Trainium chips) will be a significant bullish signal.

The "Stifling" Capex Trajectory The primary weight on Amazon's stock price recently has been the massive capital expenditure required to build out AI data centers. Amazon raised its 2025 capex guidance to $125 billion, and management has already signaled that spending will increase further in 2026 with some estimates exceeding $150 billion.

Investors are concerned that this "Capex explosion" is squeezing free cash flow. Any commentary during the earnings call that suggests a "peak" in the investment cycle or a clear path to improved cash generation could spark a major rally. Conversely, if 2026 spending guidance exceeds current fears without a corresponding jump in revenue outlook, the stock could face pressure.

Retail Resilience and Advertising Growth The fourth quarter includes the critical Prime Big Deal Days and the traditional holiday shopping season. Despite intense competition from discount platforms like Temu and Shein, Amazon’s logistics "regionalization" strategy has kept costs down and delivery speeds up.

Furthermore, Advertising continues to be a high-margin powerhouse. After growing 24% to $17.7 billion in Q3, analysts expect the advertising segment to benefit from a "seasonal spike" in Q4, potentially outperforming the core retail business and helping to pad overall operating margins.

Workforce Efficiency Following the recent announcement of 16,000 job cuts—the largest in the company’s history investors will be looking for evidence that "leaner" operations are translating to the bottom line. CEO Andy Jassy’s focus on "cost to serve" in the fulfillment network will be under the microscope.

Options market pricing suggests traders are preparing for a significant move of approximately 7% in either direction following the announcement.

The Bull Case: If Amazon delivers a "double beat" (Revenue and EPS) and provides optimistic 2026 guidance, specifically indicating that AI investments are yielding high-margin returns the stock could break out of its recent consolidation wedge and target its previous highs near $255–$260.

The Bear Case: If AWS growth shows signs of plateauing due to capacity constraints, or if the 2026 Capex forecast is viewed as "excessive" relative to cash flow, the stock could retreat toward support levels near $222–$230

The stock has been trading within a symmetrical triangle pattern since reaching a record high of $258 in November 2025. This pattern typically indicates a period of consolidation followed by a significant breakout.

Amazon Daily Chart, February 5, 2026

For the February 5 earnings call to be a success, CEO Andy Jassy and CFO Brian Olsavsky must provide clarity on several key performance indicators:

AWS Revenue Floor: A commitment to maintaining at least 20% growth throughout 2026.

Capex ROI Metrics: Evidence that the $125 billion spent in 2025 is already contributing to operating income, particularly through custom silicon adoption.

Advertising Integration: Plans for expanding ad formats beyond Prime Video, possibly into voice search (Alexa) and physical store digital signage.

FCF Guidance: A timeline for when free cash flow will return to its 2024 levels, providing reassurance that the company will not need to rely indefinitely on debt markets.

Amazon enters this earnings release as a "tweener", a company caught between its legacy as an e-commerce giant and its future as an AI infrastructure powerhouse. While the holiday retail numbers will provide the foundation, the stock's immediate future likely rests on the "AI narrative": specifically, whether the massive billions being poured into data centers are starting to pay off for the bottom line.

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