Amazon's 2025 Stumble: When Strong Results Were Already Priced In

The disconnect is stark. For all the talk of Amazon's operational strength, its stock delivered a weak performance in 2025. The shares rose about 5%, a figure that trailed the broader market's 16% gain for the S&P 500. In a year where investors expected Amazon to beat the market, the stock's underperformance signals a classic expectation gap.

The business results themselves were robust. In its fourth quarter, Amazon posted net sales of $187.8 billion, a solid 10% year-over-year increase. The company's core segments showed strength, with AWS revenue jumping 19% and advertising services hitting a new high. The full-year numbers were even more impressive, with net sales up 11% to $638 billion.

So why did the stock lag? The answer lies in what was already priced in. When a company delivers results that are strong but merely meet or slightly exceed the whisper number, the market often interprets that as a reason to sell. The good news was already in the stock price. This dynamic-where positive earnings lead to a flat or declining share price-is known as "sell the news." In Amazon's case, the market had likely baked in the expectation of another quarter of double-digit sales growth and expanding margins. When those numbers arrived, there was little new fuel to drive the rally higher, leading to the observed disconnect between a solid print and a weak stock move.

Deconstructing the Priced-In Growth

The expectation gap isn't a single number; it's a gap between what the market was pricing in for each major engine. For Amazon, that means separating the performance of its massive retail core from its high-growth cloud arm.

Retail-related revenue, which makes up about 74% of total revenue, is the bedrock of the business. The strength in Q4 was broad-based, with advertising services hitting a new high. Yet for a segment that dominates the top line, even a solid quarter of growth may not be enough to move the needle if the market's whisper number was for acceleration. The real test was AWS.

Here, the bar was set exceptionally high. In the fourth quarter, AWS sales grew 19% year-over-year. That's a strong result, but it's the next quarter's expectation that reveals the priced-in reality. The market consensus for 2026 includes a 22% expected growth rate for AWS in the next quarter. This creates a narrow expectation gap. Even a robust 19% growth rate in Q4 was below that forward-looking target, meaning the good news was already anticipated.

The bottom line is that Amazon's key growth engines were delivering solid, but not spectacular, results against a backdrop of already-elevated expectations. The retail segment met its modest targets, while AWS, despite its double-digit expansion, fell short of the 22% growth the market was pricing in for the near term. When the print meets the whisper number, there's no surprise to buy. That's the setup for a stock that stays flat even when the fundamentals are strong.

The Analyst Consensus vs. Market Skepticism Divide

The disconnect between Wall Street's bullish forecast and the market's cautious sentiment creates a clear setup for volatility. On paper, the analyst community is overwhelmingly optimistic. The consensus rating is "Strong Buy", with an average price target of $284.91, implying a 15.7% increase over the next year. Every major 2026 price target is a "Buy," and the highest forecasts point to rallies of over 30%. This bullishness is driven by expectations for catalysts like reaccelerating AWS growth and new AI products.

Yet the market's reaction tells a different story. Amazon's stock is up only 6% year-to-date, a figure that badly lags the 18% advance for the S&P 500. This underperformance reflects a deep-seated skepticism that isn't captured in the analyst consensus. Experts point to slowing sales growth in AWS and mixed sentiment on AI monetization as the core drivers of this "mixed" sentiment. The stock's weak 2025 performance, including a major layoff announcement, has cemented a view that the easy growth phases are over.

This divergence sets up a classic expectation game. The stock could rally on "buy the rumor" momentum ahead of the anticipated catalysts, as Wall Street's price targets suggest. However, the risk is a sharp reset if the reality of slower AWS growth and delayed AI profits fails to meet the already-high bar. The market's caution is a direct challenge to the bullish consensus, and the stock's path will likely depend on which side proves right.

Catalysts and Risks: Closing the Expectation Gap

The path forward hinges on a few near-term events that will determine whether Amazon can close the gap between its strong fundamentals and its stagnant stock price. The next earnings report is the primary catalyst. Any deviation from the high consensus growth rates-particularly in AWS-could trigger a sharp re-rating, either positive or negative. The market has already priced in a 22% growth rate for the cloud unit in the coming quarter. If Amazon meets that target, it may be seen as merely fulfilling expectations, leading to a "sell the news" reaction. To drive a rally, the company will need to beat that whisper number or, better yet, raise the bar with forward guidance.

A key risk is the company's ability to demonstrate that its $130 billion+ AWS run rate can sustain high double-digit growth. The recent slowdown in AWS sales growth has fueled market skepticism. If the next report shows growth decelerating further, it could force a guidance reset and shatter the bullish narrative. The market's caution is a direct challenge to the analyst consensus, and the stock's path will likely depend on which side proves right.

Beyond the numbers, investors must watch for tangible signs of AI monetization and strategic moves to address competitive pressures. Catalysts like reaccelerating AWS growth, demand for new Trainium AI chips, and further advertising expansion are cited by bulls as coming into focus soon. However, the market's mixed sentiment on AI monetization means these promises need to translate into clear revenue contributions. Similarly, any strategic moves to defend market share in a competitive e-commerce environment will be scrutinized for their impact on margins and capital allocation. The bottom line is that closing the expectation gap requires more than just solid results-it demands evidence that Amazon's growth trajectory is accelerating, not just holding steady.