GauchoRico | April 2026 | Quarter ending Dec 2025
Forget the headline revenue number for a second. The question the market is asking about Amazon is simple: Is spending $200B in capex in FY26 — on top of $128B in FY25 — going to create value or destroy it?
The Q4 results answer this decisively: value creation, and it isn't close.
AWS at 24% YoY growth on a $142B annualized run rate. Let me say that again — 24% growth on $142 billion. That's the fastest growth in 13 quarters, and it's accelerating. The sequential adds tell the story:
| Quarter | AWS Rev ($B) | QoQ Add ($B) | YoY % |
|---|---|---|---|
| Q1 FY25 | $29.3 | +$0.5 | ~17% |
| Q2 FY25 | $30.9 | +$1.6 | ~19% |
| Q3 FY25 | $33.0 | +$2.1 | ~19% |
| Q4 FY25 | $35.6 | +$2.6 | 24% |
The QoQ adds are widening every quarter: $0.5B → $1.6B → $2.1B → 2.6B.That′stextbookacceleration.Andthebacklog? * *244B, up 40% YoY and 22% QoQ.** Revenue is growing 24% but the backlog is growing 40%. That gap is your forward visibility. The demand is outstripping what they can install.
This reminds me of CRM in its best years — except CRM was doing this at $15B revenue, not $142B. The scale of what AWS is building has no historical parallel in cloud computing.
Here's why this gets interesting. AMZN trades at ~$2.2T market cap.
TTM earnings: $77.7B net income → P/E 28x. Looks full, right?
Now build forward:
Scenario 1: AWS at 22% growth (deceleration from 24%)
Scenario 2: AWS sustains 24%, total at 13.5%
PEG ratio (using Scenario 2): 22.7 / 25 = 0.91
A PEG under 1 on a company with AWS's dominance, $244B in backlog, and advertising growing 23%? That's genuinely reasonable valuation. Not cheap-cheap, but reasonable for what you're getting.
And if you extend to FY27 — even at a more modest 18% earnings growth — you'd be looking at ~$115B net income, P/E of 19x on the current market cap. Holy smokes.
TTM FCF is $11.2B. That looks terrible. But operating cash flow is $139.5B — up 20% YoY. The "problem" is $128.3B in capex, and $200B guided for FY26.
The CRM Case Study taught us that FCF margins matter because they show the business model works. AMZN's operating CF margin is 19.5% — perfectly healthy. They're choosing to reinvest at an unprecedented rate because they see an "extraordinarily unusual opportunity" (Jassy's exact words, twice on the call).
Two analysts asked for a FCF floor. Jassy deflected both times. That's the one thing I'd prefer more clarity on. But when you have $244B in backlog, $123B in cash + securities, and your custom chips are a $10B+ ARR business growing triple digits, the right capital allocation decision is to keep building.
Think about the Trainium advantage: 30-40% better price performance than comparable GPUs, fully subscribed, powering the majority of Bedrock inference. This is vertical integration that gives AWS structurally better unit economics than any competitor. Graviton is already used by 90% of AWS's top 1,000 customers.
What makes AMZN unique is that it has three businesses that would each be dominant standalone companies:
And then there are the optionality plays: Kuiper (LEO satellites, commercial launch 2026), Alexa+ ($240/year for non-Prime), Amazon Now quick commerce, Rufus AI shopping (300M users, 60% higher purchase completion). These are call options on the stock.
| Segment | Revenue/ARR | Multiple | Implied Value |
|---|---|---|---|
| AWS | $142B ARR | 12x rev | $1,704B |
| Advertising | $69B | 8x rev | $552B |
| Retail (NA + Intl) | $588B rev, $34B op income | 15x op income | $510B |
| Net cash | $57B | ||
| Total | ~$2,823B |
vs. current market cap of $2,200B. That's a 28% discount to a reasonable SOTP. The market is essentially giving you advertising and retail for free after paying for AWS.
A-minus. Jassy is making the right bet on AI infrastructure. The results are showing up — AWS re-acceleration, custom chips working, Bedrock growing 60% QoQ. The only deduction: refusing to provide any financial guardrails on the capex cycle. Two analysts asked, two deflections. A one-sentence commitment to positive FCF in FY27 would have been reassuring. But Jassy's track record on capital allocation through the AWS buildout gives him credibility here.
One thing: AWS margin trajectory as capex ramps further. Q4 was 35%, roughly stable YoY. If it drops below 30% on the $200B capex run rate, that would be a yellow flag. Above 30%, I'm fine.
AMZN is not a traditional GauchoRico portfolio holding — the total revenue growth of 12-14% is below my 30%+ preference. But AWS at 24% on $142B, with $244B in backlog, at a PEG under 1 — this is a dominant franchise at a reasonable price with multiple growth vectors.
For holders: strong hold, add on any macro-driven pullback. If you're not in AMZN and you have a bucket for dominant mega-cap compounders, Q4 FY25 just gave you the data to build a position. A 5-7% allocation in a diversified growth portfolio makes sense.
LEAPS opportunity: If AMZN pulls back to the low $190s (P/E ~25x), January 2028 $200 calls would be a fat-pitch entry.
Thesis: Intact and strengthening.
GR