Amazon to report Q4 earnings with capex, AI growth in focus

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Amazon to report Q4 earnings with capex, AI growth in focus.

watchlist :: 8hrs ago :: source - bloomberg

By Daniel Howley

Cloud giant Amazon (AMZN) will report its fourth quarter earnings after the bell on Thursday as questions about overspending and a bubble continue to dog the AI trade.

Amazon's results come after Meta (META) and Microsoft (MSFT) announced their earnings last week, drawing opposing reactions from the Street. While traders cheered on Meta, they sold off Microsoft despite both companies saying they are increasing their AI spending.

The report also follows Amazon's announcement that it is cutting 16,000 jobs as it seeks to "strengthen our organization by reducing layers, increasing ownership, and removing bureaucracy."

It's a familiar strategy across Big Tech, with companies like Microsoft and Meta "flattening" their organizational structure by laying off workers.

Amazon also said it is closing its Amazon Fresh and Amazon Go stores, replacing some with Whole Foods locations.

Amazon and Microsoft shares have been major laggards over the past 12 months, trailing Google by a wide margin.

Amazon stock is down 1.8%, while Microsoft stock is up less than 1%. Alphabet (GOOG, GOOGL) stock, meanwhile, has soared more than 60%, largely thanks to the release of its Gemini 3 AI models, which have supplanted OpenAI's (OPAI.PVT) as some of the top models around. The Google parent laid out plans for a big boost to its AI spending in its quarterly results on Wednesday.

For the quarter, Amazon is expected to report earnings per share (EPS) of $1.96 on revenue of $211.5 billion, up from $1.86 and $187.8 billion in the same period last year. That represents a 5% jump in EPS and a roughly 13% increase in revenue.

Amazon's all-important AWS segment is expected to top out at $34.9 billion, a 21% jump from the $28.8 billion the company reported last year.

Online store sales are expected to hit $82.3 billion, up 8.9% year over year. Amazon's advertising segment, which accounts for an increasingly large slice of the company's overall sales, is expected to report revenue of $21.2 billion. Amazon saw advertising revenue of $17.3 billion in Q4 2024.

Wall Street will also be paying close attention to Amazon's capital expenditures in the quarter. The company spent $34.2 billion in cash capex in Q3 and is expected to increase that to $34.9 billion in Q4.

Amazon CFO Brian Olsavsky said during the company's Q3 earnings call that the company was on pace to spend $125 billion in 2025 and would continue to ramp that in 2026 as the cloud giant works to meet demand for AI.

Amazon's spending could prove helpful for chip and infrastructure companies, but as Meta's and Microsoft's divergent trajectories in the stock market over the past week have shown, Wall Street appears to be especially on edge when it comes to capex.

And if Amazon's spending projections for 2026 are too much for traders to swallow, the company's stock price could take a big hit.

Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.