Amazon 4Q25 First Take: Headline results were solid, with revenue and OP beating estimates. Core AWS also reaccelerated as expected, with growth up 3.4ppts QoQ. Yet shares plunged after-hours, raising the question: what spooked the market?
1) AWS strong but not a big beat: AWS revenue grew 23.6% YoY, a clear QoQ reacceleration that delivered the post-capacity-ramp pickup investors were looking for. While Bloomberg cons. was 21%, buy-side expectations were closer to 23%, so it was only a small beat vs. capital’s bar.
2) Capex to surge: Management guided FY26 total capex to $200bn, 43% above the current run-rate implied by an already hefty ~$35bn per quarter. That is well ahead of other cloud giants’ capex expectations of $150–180bn. The market no longer ‘rewards’ high capex and is increasingly focused on ROI and potential margin erosion, as seen with Google and Meta.
3) Profit guide a big miss: Next quarter OP is guided to $16.5–21.5bn; even the high end sits below the ~$22bn cons. The midpoint implies OPM of 10.8%, down 100bps YoY, suggesting the outsized capex will weigh on earnings.
Overall, hyperscalers seem to be entering another ‘growth at any cost’ capex cycle to secure AI leadership, paying up for hardware. With the revenue and profit uplift from AI still uncertain, they are making balance sheets and biz. models heavier, diluting ROI and margins. Some investors view this as a deterioration of what were once excellent business models.$Amazon(AMZN.US)
