Amazon’s fourth-quarter revenue grew by 12% ignoring exchange rate impacts to $213.4bn. The cloud division AWS was up 24%, three percentage points higher than forecasts. Elsewhere, there was double-digit growth from both the North American and International segments.
Operating income was up 18% to $25.0bn, missing consensus forecasts of $25.3bn due to $2.4bn of one-off expenses.
Full-year free cash flow fell from $50.7bn to $11.2bn, reflecting higher levels of capital expenditure. Net debt, including leases, was $30.0bn.
First-quarter revenue guidance of $173.5bn-$178.5bn was in line with forecasts, but even the top end of the $16.5bn-$21.5bn operating profit range was below consensus ($22.5bn expected). Capital expenditure guidance for 2026 is around $200bn.
The shares were down 8.0% in pre-market trading.
Our view
Strong demand for computing power is becoming a consistent theme at Amazon as it ramps up its investment in all things future-facing, from bespoke AI microchips to low-orbit satellites and robotics. Preparing for these capabilities also adds cost, and disappointing near-term profit guidance prompted a negative market reaction following the announcement.
Through AWS, Amazon is a leader in cloud services, and this is Amazon’s most lucrative growth driver. Companies rely on AWS for core IT infrastructure, and with the new wave of AI demand, computing power is the hottest commodity.
AWS is coming off a larger base, so it’s not too surprising to see peers throwing out bigger growth numbers. But importantly, AWS added more absolute dollars this quarter than its competition. There are still some concerns about margins and its competitive position for AI workloads. That said, it’s still a phenomenal business and we were encouraged to hear about strong backlog growth, with supply still falling behind the mammoth demand.
The aggressive investment guide is key and mirrors sentiments from other mega-cap players. The vast majority of that spend will focus on cloud and AI infrastructure, as well as investment to improve the efficiency of the retail business (robotics/automation).
Amazon has a powerful balance sheet and, while cash flows lag its big tech rivals, there’s enough in the tank to pay for all this investment – for now. The more important question, like others face, is whether margins can remain stable once these costs start to pass through the income statement.
The retail business is in much better shape than a few years ago, which helps now that tariff uncertainty has been added to the mix. So far, performance has held up well, with no clear signs of a demand slowdown. We think dominant players are best placed to not only ride out slower growth but also use their scale to gain share.
We're also supportive of growth in services like Prime, and the group's advertising arm. It's been impressive to see the latter continue its strong progress. Troves of data footprints and millions of customers ready and willing to click buy are a marketer's dream.
Amazon spent much of 2025 flying under the radar, but investors are waking up to the strengths on offer. We see further upside potential, driven by a robust cloud business and opportunities for both growth and efficiency gains in retail. However, the weaker cash flow profile is a risk, and Amazon is more exposed to shifts in consumer spending than some of its tech peers, meaning volatility may be higher than some of the other big cloud names.
Amazon key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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