Amazon Earnings Preview: Gradually Accelerating AWS vs. Free Cash Flow Concerns

– Amazon's revenue is expected to be $211.23B for 2025Q4, up 12.48% YOY. The company previously guided Q4 revenue of 206–213 billion, implying year-over-year growth of 9.7% to 13.4%.

– EPS is estimated to be $1.959, up 5.33% YOY.

– On profits, the company had guided Q4 operating profit of 21–26 billion, and results typically come in near the high end. Its upper limit implies a growth rate of 22.6%.

The retail segment grew by 11% in North America and 14% in other regions last quarter. Last year, Amazon continued to improve its same-day fulfillment capabilities, expand its grocery categories, and increase its delivery geographic reach. These moves are expected to enable Amazon to continue driving its e-commerce penetration rate in the US retail industry.

Advertising is another fast-growing segment for Amazon, with revenue maintaining a growth rate of over 20%. Meta's results provided signs of strong demand for online advertising. Amazon’s e-commerce advertising and streaming media advertising will also benefit from this trend.

During its Q3 2025 earnings call, Amazon stated that its AWS capacity "is on track to double from Q3 2025 levels by 2027," a stark contrast to the tone of previous quarters marked by ongoing supply constraints. Management also noted in the Q3 2025 call that demand for artificial intelligence continues to outpace supply, stating, "We can convert that capacity into revenue as quickly as we can currently." The market generally expects AWS revenue growth to be slightly above 20%, but investors should be wary of potential compression of cloud business profit margins.

Amazon's capital expenditures increased by 55.2% in Q3 2025. Previously, the shipment forecast for Trainium, the second largest ASIC manufacturer, was lowered in 2026. This means that Amazon will have to rely more on external suppliers such as Nvidia for AI chips, which may further suppress its free cash flow.

The put/call ratio for Amazon options is currently 0.70, lower than the level during the last earnings season, indicating a weakening of bearish momentum. IV (Implied Volatility) data shows that its volatility is 43.99%. On average, the stock price has fluctuated by 6.22% on the first trading day after past earnings announcements.

– Potential Positive Catalysts: Advertising industry recovery; strong demand for cloud services

– Risks to Monitor: macroeconomic slowdown

– Valuation:

Amazon's PE ratio is 33.7 times, which is at the 39th percentile of its historical range over the past five years.

Also check out moomoo's past insights on Amazon: