Buy the Dip in Amazon Stock After Mixed Q4 Results & CapEx Concerns?

Reporting Q4 results Thursday evening, Amazon’s AMZN quarterly revenue was exceptionally strong as all of its major business segments grew at double-digit rates.

The tech giant benefited from robust cloud demand, strong holiday shopping, and continued expansion in advertising. Amazon’s AI endeavors were a major driver, boosting AWS cloud growth while strengthening advertising performance and improving logistics efficiency.

However, the cloud and e-commerce leader slightly missed earnings expectations and announced that it will be boosting its capital expenditures to a massive $200 billion in 2026, the largest spend plans in the company's history and a 53% uptick from the $131 billion it spent last year.

This sent Amazon stock tumbling as much as 10% in Friday’s trading session, but in the aftermath, AMZN is trading near its cheapest forward P/E valuation in the last decade at 28X.

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Amazon’s Q4 Highlights

Posting record Q4 sales of $213.38 billion, Amazon’s top line stretched nearly 14% year over year from $187.79 billion in the comparative quarter and topped estimates of $211.45 billon.

Advertising and Cloud (AWS) revenue spiked over 20%, respectively, to $21.32 billion and $35.6 billion. Meanwhile, regarding Amazon’s retail segments, North America sales increased 10% to $127.1 billion, with International sales spiking 17% to $50.7 billion.

Furthermore, Q4 net income of $21.2 billion was up 6% YoY, with adjusted earnings per share of $1.95 increasing 5%, but missing EPS expectations of $1.98.

Prior to the earnings miss, Amazon had exceeded bottom line expectations for 12 consecutive quarters and has still posted a very impressive average EPS surprise of 16.5% in its last four quarterly reports.

Notably, Amazon has now surpassed top line expectations for six straight quarters, with an average sales surprise of 1.55% in its last four quarterly reports.

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Amazon's Full-Year Results & Revenue Guidance

Rounding out fiscal 2025, Amazon’s annual sales surpassed $700 billion for the first time, increasing 12% to a peak of $716.92 billion. Full-year adjusted EPS soared 30% to a new peak of $7.17 from $5.53 per share in 2024.

Providing revenue guidance for Q1, Amazon expects quarterly sales to be between $173.5-$178.5 billion or 11-15% growth. The top end of the guidance range came in above the consensus expectations of $175.48 billion (Current Qtr below).

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Monitoring Amazon’s ROIC

It’s noteworthy that Amazon CEO Andy Jassy stated the company has deep experience in understanding demand signals in its AWS cloud business and then turning that capacity into a strong return on invested capital (ROIC).

The comment underscores that AI workloads aren’t just growing, they’re growing predictably enough for Amazon to confidently scale infrastructure.

Given the bullish CapEx spend geared torward building out infrastructure and its own AI chips, the sharp increase in Amazon’s ROIC is very desirable and reassuring, as pictured below. Showing the ability to turn invested capital into profits, ROIC is one of the clearest indicators of long-term shareholder value.

Amazon’s ROIC is at a respectable 16%, although this is still beneath the often desired level of 20% or higher and the lowest percentage among the other Mag 7 hyperscalers, which includes cloud services peers Alphabet GOOGL and Microsoft MSFT, along with Meta Platforms META, considering its magnitude of AI training clusters for large language models (LLMs).

Still, Amazon’s increasing ROIC is intriguing and edges its Zacks E-Commerce Market’s 15%.

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Conclusion & Final Thoughts

Even with a slight EPS miss and a massive 2026 CapEx plan, Amazon’s Q4 results revealed a company whose core engines are accelerating at the same time, something that it hasn’t experienced in years.

For long-term investors, the combination of strong fundamentals and temporary fear over investment spending is often the exact moment when Amazon has historically been most attractive, producing market-leading and, for some, life-changing gains of over +700% in the last decade.

With Amazon stock trading at its cheapest P/E valuation in the last 10 years, this post-earnings selloff could indeed be one of the rarer buying opportunities on the dip. Optimistically, AMZN currently sports a Zacks Rank #2 (Buy) based on a trend of positive EPS revisions for FY26 and FY27.

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This article originally published on Zacks Investment Research (zacks.com).

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