Earnings Date: February 5, 2026 | Quarter Ending: Dec 2025 Analysis Date: 2026-04-01 Source: Scout brief (AMZN_earnings-review_2026-04-01), transcript digest, quant prep, scuttlebutt Atlas baseline: Not available — first-time coverage Prior StockNovice writings on AMZN: None — first analysis
Here's how I'm thinking about it: Amazon put up a Q4 that, on the surface, looks like another dominant quarter from a company firing on nearly all cylinders. $213.4B in revenue (+13.6% YoY), beating the high end of guidance by $400M. AWS re-accelerated to 24% — its fastest growth in 13 quarters. Advertising grew 23%. North America hit a record 9.0% operating margin. And the beat-and-raise pattern continues — seven straight quarterly revenue beats.
But there's one thing that keeps tugging at me, and it's the same thing that two analysts asked about on the call and got no answer: where's the FCF floor? Andy Jassy deflected the question twice. That doesn't break the thesis — but it tells you what the debate is.
| Metric | Q4 FY25 | Q4 FY24 | YoY | vs Guide Mid | Verdict |
|---|---|---|---|---|---|
| Revenue ($B) | $213.4 | $187.8 | +13.6% | +1.9% beat ($3.9B) | Beat |
| Op Income ($B) | $25.0 (rptd) / $27.4 (adj) | $21.2 | +18% rptd / +29% adj | N/A | Strong |
| Net Income ($B) | $21.2 | $20.0 | +6.0% | — | Flat-ish |
| EPS (diluted) | $1.95 | $1.86 | +4.8% | — | OK |
| AWS Revenue ($B) | $35.6 | $28.8 | +24% | — | Accelerating |
| AWS Op Margin | 35.0% | 36.9% | -1.9pp | — | Compressing |
| Advertising ($B) | $21.3 | $17.3 | +23% | — | Strong |
| NA Op Margin | 9.0% | 8.0% | +1.0pp | — | Record |
| Intl Op Margin | 2.1% | 3.0% | -0.9pp | — | Charges + investment |
| Q4 FCF ($B) | $14.9 | $17.8 | -16% | — | Capex drag |
| TTM FCF ($B) | $11.2 | $38.2 | -71% | — | Compressed |
| SBC % of Rev | 2.1% | 2.7% | -60bps | — | Declining |
Q1 FY26 Guidance: Revenue 173.5B−178.5B (mid $176B, +13% YoY). Op Income 16.5B−21.5B. FY26 CapEx ~$200B.
Beat pattern: Amazon has beaten the high end of revenue guidance for 7 consecutive quarters. That's the definition of a conservative guider. This is about as reliable a beat-and-raise as you'll find at this scale.
This is the star of the show and it's not close.
| Metric | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Trend |
|---|---|---|---|---|---|
| Revenue ($B) | $29.3 | $30.9 | $33.0 | $35.6 | Up |
| QoQ growth | +1.7% | +5.5% | +6.9% | +7.8% | Accelerating 4 straight Qs |
| YoY growth | +17% | +19% | +19% | +24% | Re-acceleration |
| Op Margin | 39.5% | 32.9% | 34.6% | 35.0% | Stabilizing after Q2 dip |
Four consecutive quarters of sequential acceleration. AWS is now a $142B annualized run rate business growing 24%. As Jassy put it: "It's very different having 24% year-over-year growth on a $142 billion annualized run rate than to have a higher percentage growth on a meaningfully smaller base." That's a direct shot at Azure and Google Cloud. And he's right — 24% of $142B is $34B in incremental annual revenue. Nobody else is adding that much.
The backlog tells the forward story: $244B, up 40% YoY and 22% QoQ. That's 1.7x AWS trailing twelve-month revenue. The demand is not a mirage.
Custom chips (Trainium + Graviton): Now >$10B combined ARR, growing triple-digit percent YoY. Trainium alone is "fully subscribed" and is the majority underpinning of Bedrock inference. Graviton is used by 90% of AWS's top 1,000 customers. This gives Amazon a structural cost advantage — 30-40% better price performance than comparable GPUs. This is real differentiation, not marketing fluff.
Bedrock: Multibillion-dollar ARR, customer spend +60% QoQ. That's the kind of acceleration that says "we're not early anymore."
But: AWS margin is compressing. 35.0% vs 36.9% a year ago. That's the $200B capex showing up as depreciation. Olsavsky said margins "will fluctuate" — which is CFO-speak for "expect more compression." The question is whether revenue growth outpaces margin dilution. At 24% revenue growth with only -1.9pp margin compression, the profit pool is still growing. But it's worth watching.
$21.3B in Q4, +23% YoY. This is now a $69B annual business growing faster than Google or Meta's ad revenues in the quarter. Amazon commands >one-third of global retail media spend. Prime Video ads now reach 315M global viewers (up from 200M in early 2024).
This is pure high-margin revenue layered on top of existing commerce infrastructure. It's the closest thing Amazon has to "free money" and it's still accelerating. I love this business within a business.
9.0% operating margin — highest ever in the data set. Revenue +10% YoY. Paid units +12% YoY (best of FY25). Same-day delivery used by ~100M customers, volumes up 30%+ YoY. Cost efficiencies from regionalization (now 10 regions), unit consolidation, and 1M+ robots in fulfillment.
This segment has been a profitability transformation story over 3 years (1.8% op margin in Q4 FY22 to 9.0% now). That's not an accident — it's operating leverage from scale plus disciplined efficiency work.
2.1% operating margin, down from 3.0% YoY. But this is muddied by $1.1B in Italy tax resolution charges. Excluding special charges, margins expanded YoY. The real story is investment in quick commerce (Amazon Now — India, Mexico, UAE, testing in US/UK) and sharper competitive pricing. International revenue +17% YoY (+11% ex-FX). I'm not concerned about the margin compression here — it's deliberate investment to expand the addressable market. Just need to track that it eventually translates to margins like we've seen in North America.
This is the core of how I think about any position. Where is the actual delivering happening, and where is it still a story?
Verdict: The core business is overwhelmingly "Is." AWS, advertising, NA retail — these are proven, delivering, and accelerating. The "Could Be" elements (Leo, Alexa+, quick commerce) are optionality on top of a strong base. I can live with that.
Let me be honest about what I don't fully know here.
Amazon is guiding $200B in capex for FY26. That's up from $128B in FY25, which was up from $78B in FY24. In three years, capex has nearly tripled. TTM FCF has gone from $38B to $11B.
The bull case: Jassy repeated "strong return on invested capital" six times on the call. AWS is monetizing capacity "as fast as we install it." Backlog is $244B and growing 40% YoY. The demand from AI workloads is real, supply-constrained, and accelerating. Core (non-AI) cloud migration is also picking up. Amazon's custom chips give it a structural cost advantage that should translate to better unit economics over time. Every major tech company is making this bet — Amazon's the one with the most diversified demand base.
The bear case: $200B is ~28% of run-rate revenue. FCF has cratered. Management won't commit to any floor. We're taking it on faith that demand persists and ROIC materializes. If AI spending decelerates or overcapacity develops, Amazon is sitting on a mountain of depreciating assets.
My take: I lean bullish here, but with open eyes. The demand signals are as strong as you could ask for — $244B backlog, 24% AWS growth at $142B scale, custom chips fully subscribed. This isn't speculative infrastructure buildout; it's capacity being consumed. But the lack of FCF guardrails is a yellow flag. When two analysts independently ask about FCF floors and both get the "extraordinarily unusual opportunity" treatment... management is telling you something about their priorities. They're prioritizing market share capture over near-term cash generation. That's fine if they're right about the opportunity. But I want to track this closely.
The qualitative research added some useful color:
Positive signals:
Concerning signals:
| Metric | Value | Comment |
|---|---|---|
| Market Cap | ~$2,200B | |
| P/S (run-rate) | 2.58x | Reasonable for the growth profile |
| P/E (GAAP, run-rate) | 28.4x | Attractive given 13%+ revenue growth + margin expansion |
| P/Op Income | 27.5x | $80B FY25 op income base |
| EV/FCF | 196x | Meaningless — FCF suppressed by capex |
| PEG (P/S / Rev Growth) | 0.19x | Very attractive on revenue growth basis |
The P/E at 28x is not stretched for a company growing revenue 13%+, growing operating income 17%+, and with a 142Bcloudbusinessaccelerating.FCF − basedvaluationistemporarilybrokenbythecapexcycle—youhavetolookatoperatingcashflow(139.5B TTM) as the true cash generation proxy. On OCF, this trades at ~16x, which is cheap.
Prior Beliefs: First-time coverage — no prior thesis. Going in with the general awareness that Amazon is the dominant cloud + commerce platform, currently in a massive AI capex cycle.
Updated Beliefs:
Starter. This is a company where the "Is" vastly outweighs the "Could Be." AWS is accelerating at massive scale, advertising is a compounding flywheel, retail is hitting record margins, and the beat-and-raise pattern is as reliable as any company at this scale. The capex cycle is the primary debate, and on balance, the demand signals justify the spend. Valuation at 28x earnings with 13%+ growth and operating leverage is reasonable.
What would make me trim: AWS growth decelerating below 20% for 2 consecutive quarters without a clear supply-side explanation. Management guiding down. FCF going meaningfully negative for full year (not just quarters). AWS margin falling below 30% with no offset in revenue acceleration.
What would make me add: AWS re-accelerating further on backlog conversion. Advertising maintaining 20%+ growth at scale. NA margin continuing to expand toward 10%+. FCF stabilizing as capex plateaus.
As usual, thanks for reading.