To The Moon

$Amazon.com(AMZN)$ is set to report its fiscal Q4 2025 earnings on Thursday, February 5, 2026, after the market closes. While Amazon enters the report with a "Strong Buy" consensus from analysts, the stock has been a relative laggard over the last year, remaining nearly flat while the S&P 500 gained ~15%.

The narrative for this quarter is a tug-of-war between AWS acceleration and massive AI capital expenditures (capex).

Key Metrics to Watch

Investors will be scanning the report for these three "make or break" figures:

AWS Revenue Growth & Backlog: Consensus estimates for AWS growth sit around 21% to 22% ($34.9B+). Watch the $200B+ backlog; if Amazon can show a faster conversion of this backlog into current revenue, it signals that AI is finally hitting the top line in a meaningful way.

Capex Trajectory: Amazon spent roughly $125B in 2025 on infrastructure. Any guidance suggesting 2026 spending will exceed $150B without a corresponding spike in AWS margins could spook investors concerned about free cash flow (FCF) erosion.

Advertising Growth: Advertising is Amazon's highest-margin segment. Analysts expect revenue around $18B+. Strength here provides the "buffer" needed to fund expensive AI investments without crushing overall operating income.

Amazon’s fiscal Q3 2025 report (released October 30, 2025) was a classic "beat and drop" scenario. While the numbers were objectively strong, the market’s reaction—a ~3% dip in after-hours trading—highlighted a shift in investor priorities from simple growth to "AI efficiency."

Q3 2025 Earnings Summary

• Top-line Growth: Revenue hit $180.2 billion (up 13% YoY), beating the consensus of $177.7 billion.

• EPS Beat: Reported $1.95 per share, significantly higher than the $1.56 estimate. However, this was heavily "padded" by a $9.5 billion pre-tax gain from Amazon’s investment in Anthropic.

• AWS Re-acceleration: The crown jewel grew 20.2% YoY to $33 billion. CEO Andy Jassy noted this was the fastest expansion pace since 2022, driven by a $200B+ backlog.

• Operational Charges: Operating income was $17.4 billion, but it was weighed down by $4.3 billion in special charges ($2.5B for an FTC settlement and $1.8B in severance costs). Excluding these, operating income would have been a record $21.7 billion.

• The Capex Surge: Cash capital expenditure hit $34.2 billion for the quarter, bringing the year-to-date total to ~$90 billion.

The "Lessons Learnt" from Guidance

The guidance for Q4 2025 and the full year 2026 provided two critical lessons for investors:

1. The "Power Bottleneck" is the New Silicon Shortage

Management indicated that while chip supply (like NVIDIA H200s or their own Trainium2) is improving, the primary constraint for AI growth has shifted to power and data center capacity.

• The Lesson: Growth in 2026 won't be limited by who has the best AI model, but by who can build and power data centers the fastest. Amazon's addition of 3.8 gigawatts of capacity in a single year shows they are playing a "land grab" game.

2. High Capex is the "New Normal"

CFO Brian Olsavsky explicitly stated that capex would hit $125 billion for 2025 and—crucially—increase in 2026.

• The Lesson: Investors must get comfortable with lower Free Cash Flow (FCF) in the short term. Amazon is prioritizing "future-proofing" AWS over immediate cash returns. In Q3, TTM Free Cash Flow dropped significantly to $14.8 billion (from $47.7 billion a year prior) because of this infrastructure spend.

3. Efficiency Must Offset AI Costs

While AWS margins improved slightly to 34.6% in Q3, management warned that depreciation from all those new data centers would create "headwinds" in 2026.

• The Lesson: For the stock to move higher, the North America retail segment must continue to find "pockets of efficiency" (like the 4-day reduction in inbound lead times seen in Q3) to maintain overall corporate profitability while AWS absorbs the heavy AI costs.

Amazon (AMZN) Price Target

Based on 72 analysts offering 12 month price targets for Amazon in the last 3 months. The average price target is $292.64 with a high forecast of $360.00 and a low forecast of $227.10. The average price target represents a 22.64% change from the last price of $238.62.

Trading Opportunity: Short-Term Post Earnings

Amazon’s stock has a history of high volatility post-earnings, often moving 5–8% in either direction.

AMZN vs. GOOGL: The AI Narrative

When comparing Amazon to Alphabet (GOOGL), the AI dynamics are distinct:

Growth Velocity: Alphabet has shown slightly faster cloud growth recently (~34-36% for Google Cloud) compared to AWS’s 20-22%. However, AWS is starting from a much larger base.

Monetization Strategy: * Alphabet is defensive/offensive in Search, using AI (Gemini) to protect its ad moat.

Amazon is a "pick and shovel" play. Through Bedrock and their custom Trainium2 chips, they are positioning AWS as the most cost-effective place for enterprises to build their own AI, rather than just using a finished chatbot.

Valuation: AMZN currently trades at a lower EV/EBITDA multiple (~11.8x) compared to historical averages, whereas GOOGL has already seen a significant run-up. If Amazon proves its AI chips (Trainium/Inferentia) are gaining adoption beyond Anthropic, it could close the "AI valuation gap" with Alphabet.

Bottom Line: Amazon has more to prove this quarter than Alphabet. Alphabet has already convinced the market of its AI integration; Amazon must now prove that its massive infrastructure spend is turning into superior AWS margins.

Technical Analysis - Exponential Moving Average (EMA)

We are seeing pretty strong positive RSI momentum from AMZN ahead of its earnings. We are seeing AMZN traded in range-bound, so investors might be waiting to see if Amazon could prove that its huge investment could product strong AWS margins, we have seen how $Alphabet(GOOGL)$ have convinced investors of its AI integration.

We could see surge in stock price post earnings if AMZN could produce a strong AWS margins and show that the AI demand is still growing into 2026 and beyond.

Summary

Amazon (AMZN) reports Q4 2025 earnings this Thursday, February 5, 2026, after market close. Following a year where the stock has remained nearly flat while the broader market gained 15%, this report is seen as a critical catalyst for a potential breakout.

Financial Estimates

• Revenue: Consensus is pegged at $211.5 billion (up 12.6% YoY), within management's guidance of $206B–$213B.

• Earnings per Share (EPS): Analysts expect $1.98, representing 6.5% YoY growth.

• AWS Revenue: Projected to hit $35 billion (+21.6% YoY), a key re-acceleration from previous years.

The Bull Case: AWS and Advertising

Investors are looking for "AI proof of life" in the AWS segment. The focus is on the $200 billion+ backlog and how quickly it is converting to revenue. Additionally, Advertising—Amazon's highest-margin business—is expected to grow ~22% to over $21 billion, fueled by Prime Video ad expansion and record-breaking holiday traffic.

The Bear Case: The "Capex Trap"

The primary concern is Amazon’s massive spending. The company spent $125 billion on capex in 2025, with guidance suggesting 2026 could exceed $150 billion.

• The Risk: If this spending doesn't immediately translate to higher AWS margins or if it further suppresses Free Cash Flow (which saw a significant TTM decline in Q3), the market may punish the stock despite a revenue beat.

Market Sentiment

Wall Street remains overwhelmingly bullish, with a "Strong Buy" consensus and a mean price target of $294 (representing ~20% upside). Options markets are currently pricing in an 8.01% implied move post-earnings, suggesting significant volatility.

Key Lesson from 2025: High revenue is no longer enough; the market now demands "AI efficiency"—proving that massive infrastructure investments can coexist with expanding operating margins.

Appreciate if you could share your thoughts in the comment section whether you think AMZN could show results that its investment can coexist with “AI efficiency” and produce expanding operating margins.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.