Amazon Goes Into Earnings With AWS Momentum — And A Capex Problem

Amazon reports after the close with shares down about 3.7% on the day and sitting on the 200-day moving average, a setup that screams “make the case” more than “beat the quarter.” The market already expects a big holiday print; what it wants now is proof that the AI spending cycle has a payoff schedule, not just a larger invoice.

What The Market Is Expecting

Street expectations in your notes cluster around Q4 revenue of roughly $211.2–$211.6B and EPS around $1.97–$1.98, near the top end of Amazon’s prior revenue guide ($206B–$213B). AWS is expected around ~$35B of revenue with ~21–22% year-over-year growth, and the rest of the story is basically: can advertising and retail efficiencies keep margins firm while AI-related capex rises again in 2026.

The Two Numbers That Actually Matter Tonight

AWS Growth And Forward Demand Signals: AWS remains the profit engine and the cleanest lever for multiple expansion. Investors will focus less on the quarter and more on whether acceleration is continuing, whether backlog conversion remains healthy, and what the limiting factor is (power, chips, networking gear, or something more structural like competition). Any evidence that incremental capacity is turning into realized revenue — not just depreciation — is the bull case.

2026 Capex And Return On Investment Framing: This is the stock’s current “tax.” 2025 cash capex is expected to be around $125B with an expected step-up in 2026 (some estimates floating >$150B). The exact number matters, but the slope matters more: management needs to connect spending to capacity coming online, utilization ramp, and eventual free cash flow normalization. If capex goes up without a clearer ROI framework, the market tends to react like it’s funding a very large science fair.

Advertising And Retail: The Margin Shock Absorbers

Advertising should remain a key stabilizer because it scales with attractive incremental margins. The market will look for sustained growth and any proof that AI tools are improving performance (better targeting, better conversion, more valuable intent signals). If Amazon can argue that AI shopping tools increase conversion and make ads more valuable, it helps counter the fear that “agents” disintermediate marketplace monetization.

Retail is about efficiency versus macro headwinds. Investors will listen for whether fulfillment automation and network regionalization are still pushing cost-to-serve lower, and whether tariffs are starting to show up in pricing, demand elasticity, or seller behavior. Recent comments have suggested tariffs have begun “creeping” into some prices, which raises the stakes for the consumer and for unit economics.

Layoffs And Operating Leverage

Cost discipline matters, but the market is cynical: layoffs only help if operating leverage shows up in results while the company keeps funding the capex cycle. If management can point to lower opex growth and cleaner execution without sounding like they’re starving growth initiatives, it’s supportive. If it reads like “cuts to pay for servers,” investors will treat it as a wash.

How This Compares To Other Mega-Caps

The broader Mag 7 tape has rewarded strong prints only when they come with a believable margin/ROI story, and it has punished “capex up, payback vague.” Amazon’s advantage is that it has three legitimate engines (AWS, Ads, and Retail Efficiency). The risk is that it still gets bucketed with the AI-capex heavyweights unless tonight’s call provides a clearer bridge between spending and cash generation.

What Would Move The Stock

If AWS lands at or above the ~21–22% growth expectations and management gives a more coherent 2026 capex/ROI narrative (even without tight numbers), the 200-day setup can turn into a clean relief rally. If AWS is merely “fine” and capex steps up without better ROI framing, you risk the same pattern as last quarter: good report, then investors sell the cash-flow math.