Amazon Q4 2025 earnings preview: AWS growth and cash flow concerns under spotlight

When is Amazon reporting earnings?

Amazon is scheduled to release its fourth-quarter (Q4) and full-year (FY) 2025 financial results after US market close on Thursday, 5 February. The earnings conference call will commence at 2.00pm Pacific Time.

AWS accelerates while cash flow deteriorates in Q3

|Amazon delivered mixed third-quarter results, with revenue reaching $180.2 billion—a 13% year-on-year (YoY) increase that exceeded analyst expectations. However, operating income of $17.4 billion remained flat YoY, constrained by $4.3 billion in special charges including a $2.5 billion Federal Trade Commission settlement and $1.8 billion in severance costs related to 14,000 corporate redundancies announced in October.

Excluding these non-recurring items, operating income would have reached $21.7 billion, demonstrating underlying operational resilience. Net income surged 38% to $21.2 billion, though this figure was substantially inflated by $9.5 billion in non-operating gains from the revaluation of Amazon's investment in Anthropic.

Amazon Web Services (AWS) emerged as the quarter's standout performer, with revenue accelerating 20% YoY to $33.0 billion, marking AWS's fastest expansion since 2022. The cloud division's $11.4 billion in operating income and robust $200 billion backlog underscore sustained enterprise demand for artificial intelligence (AI) workloads. Advertising revenue grew 24% to $17.7 billion, outpacing retail growth and reinforcing its position as a high-margin profit driver.

The concerning metric was free cash flow, which plummeted 69% to just $14.8 billion on a trailing twelve-month basis, driven by a $50.9 billion YoY surge in capital expenditure (capex). This dramatic deterioration highlights the financial strain of Amazon's AI infrastructure buildout. Amazon raised $15 billion through a bond offering in November 2025—its first US dollar debt issuance in three years—as the company increasingly turns to debt markets to finance its AI ambitions.

Double-digit growth with margin improvement expected in Q4

Analyst consensus reflects expectations for sustained momentum in the holiday quarter. Operating margins are anticipated to expand as the higher-margin segments (AWS and advertising) outpace growth in the core retail business.

Below are the analysts' estimates based on LSEG data:

Source: LSEG, as of 28 January 2026

What to watch for in Q4 earnings call

Investors will focus on several critical areas during the announcement:

Capital expenditure trajectory and cash flow outlook

Amazon raised full-year 2025 capex guidance to $125 billion in October, with management explicitly stating spending will increase further in 2026. Estimates suggest 2026 capex could exceed $150 billion, primarily directed towards AWS AI infrastructure. With free cash flow under severe pressure, investors will scrutinise whether Amazon can articulate a credible path to improved cash generation or whether the company will increasingly rely on debt markets to finance expansion.

AWS competitive positioning

Whilst AWS's 20% growth represents reacceleration, Microsoft Azure and Google Cloud are gaining ground at 40% and 34% respectively. AWS maintains market leadership with approximately 30% share, but competitors are narrowing the gap. Investors will seek clarity on whether AWS can sustain elevated growth rates, particularly given capacity constraints. Management commentary on competitive dynamics, pricing strategy, and the $200 billion backlog conversion timeline will be closely monitored.

AI chip adoption

Amazon's Trainium chips, designed in-house for AI model training and inference, represent a strategic initiative to reduce dependency on Nvidia whilst offering customers superior price-performance economics.

However, Chief Executive Officer (CEO) Andy Jassy acknowledged that 'Trainium is being used by a small number of very large customers', with Anthropic's Project Rainier—currently utilising nearly 500,000 Trainium2 chips and expected to scale beyond one million shortly—representing the flagship deployment. Investors require evidence of broader customer adoption beyond Anthropic to validate the substantial research and development investment.

Holiday quarter performance

The fourth quarter represents Amazon's most critical retail period, encompassing Prime Big Deal Days in October, Black Friday and Cyber Monday in late November, and the Christmas shopping season. Following a record-breaking Prime Day in July, investors will scrutinise whether Amazon maintained momentum through these concentrated peak demand periods. Performance against the company's Q4 revenue guidance of $206-213 billion will signal retail strength amid intensifying competition from Walmart, Temu and Shein, which have pressured Amazon's margins.

Improved analyst conviction

Wall Street analyst sentiment is generally positive, with 67 'strong buy' or 'buy' ratings out of 71 analyst ratings. The average target price has increased from $267 before Q3 earnings to $293, which represents a 20% upside from current levels.

Figure 1: Wall Street analyst estimates

Technical analysis reveals constructive setup

Following a steady recovery from its April low of $161.38, Amazon's share price has spent the past four months consolidating within a narrowing wedge pattern. The stock is currently testing the upper resistance of this range after a recent bounce, holding firmly above its key moving averages (MAs).

Momentum indicators reinforce a constructive outlook. The relative strength index (RSI) has strengthened above 60, indicating healthy bullish sentiment without being overbought. Simultaneously, the moving average convergence divergence (MACD) shows signs of a positive crossover.

A positive surprise from the earnings announcement could trigger a clear breakout from this consolidation phase, with share prices potentially targeting the previous high of $258.60. Conversely, disappointing results could cause a rejection at the current resistance line, triggering a retreat towards the lower support level near $230.

Figure 2: Amazon's daily price chart

• _{This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}