Amazon’s Q4 Earnings: AI Spending Spree, Job Cuts, and Retail Resilience

As the tech industry’s earnings season reaches its crescendo, all eyes are on Amazon’s fourth-quarter report, which promises to reveal whether the company’s massive AI infrastructure investments are paying off—or if they’re just another brick in an increasingly expensive wall.

The Numbers Game: What Wall Street Expects

Amazon is set to report fourth-quarter earnings on Thursday, with Wall Street projecting revenue between $211-212 billion—right at the high end of the company’s guidance. Analysts are forecasting operating income of approximately $25 billion and earnings per share around $1.96, representing roughly 5% growth year-over-year.

But these headline numbers only tell part of the story. The real narrative revolves around Amazon’s aggressive capital expenditure strategy and its implications for the company’s future.

The $125 Billion AI Bet

In a move that underscores the tech industry’s AI obsession, Amazon has allocated approximately $125 billion for capital expenditures in 2025. The lion’s share of this investment is directed toward building out AI infrastructure and expanding data center capabilities—a bet that the company’s CEO Andy Jassy believes will pay dividends in the coming years.

This massive spending spree comes at a time when Amazon is simultaneously executing what Jassy has described as a “campaign against bureaucracy.” Since October, the company has cut approximately 30,000 corporate jobs, representing one of the most significant workforce reductions in its history.

The juxtaposition is striking: while Amazon is slashing jobs in certain areas, it’s simultaneously pouring unprecedented resources into AI infrastructure. This dual strategy reflects the company’s attempt to streamline operations while positioning itself at the forefront of the AI revolution.

Cloud Computing: The Revenue Engine

For investors, Amazon Web Services (AWS) remains the crown jewel and the primary indicator of whether the company’s AI investments are bearing fruit. In the third quarter, AWS revenue grew approximately 20% year-over-year to $33 billion, marking its fastest growth pace since late 2022.

Wedbush analyst Scott Devitt is optimistic about AWS’s trajectory, writing in a recent note that “we expect 2026 to be a big year for AWS” and seeing “opportunity for further upside to operating income expectations.”

However, the long-term outlook remains uncertain. William Blair analyst Dylan Carden estimates that AWS could grow anywhere from 21% to 36% annually through 2027—a range he jokingly called “a perfectly narrow range” for financial modeling. This wide projection range underscores the fundamental uncertainty surrounding long-term cloud and AI demand.

The Retail Giant Behind the Tech Company

It’s easy to get caught up in Amazon’s AI narrative and forget that, at its core, Amazon remains one of the world’s largest retailers and e-commerce platforms. The fourth quarter is peak season for retail, and Amazon’s performance during this period could provide crucial insights into its competitive position.

Wedbush analysts project Amazon’s online stores revenue to reach $82.5 billion in the fourth quarter, representing a 9.3% increase from the same period last year. This figure slightly exceeds the broader consensus estimate of $82.1 billion for the segment.

Consumer sentiment appears to be in Amazon’s favor. The firm’s consumer survey revealed that 46% of U.S. consumers planned to increase their online spending in the fourth quarter, with a remarkable 62% intending to spend more on Amazon specifically over the next 12 months. This positions Amazon well ahead of competitors like Walmart (53%) and Target (23%).

Logistics: The Unsung Hero

Amazon’s logistics capabilities continue to be a significant competitive advantage. This week, the company announced that it delivered more than 13 billion items the same or next day globally in 2025—a new record for the third consecutive year.

This achievement is particularly noteworthy given the recent closure of Amazon Fresh and Go stores, which the company shuttered to focus on Whole Foods and grocery delivery. Despite these closures, Amazon has been expanding same-day delivery of perishable groceries to more than 2,300 cities.

The company’s shopping assistant, Rufus, has also gained traction with 250 million customers using the AI-powered tool. Perhaps more impressively, shoppers are 60% more likely to complete a purchase when they use Rufus, demonstrating the tangible impact of Amazon’s AI investments on its core retail business.

The Competitive Landscape

While Amazon’s logistics and AI capabilities remain formidable, the retail landscape has become more competitive than it has been in years. Walmart, Temu, and Shein are all pressuring Amazon’s margins, forcing the company to lean harder on delivery speed and Prime loyalty to defend its position.

The pressure from these competitors has pushed Amazon to innovate and optimize its operations continuously. The company’s ability to maintain its market leadership while simultaneously investing heavily in AI infrastructure and streamlining its workforce will be a key focus for investors.

What to Watch For

As Amazon reports its earnings, investors and analysts will be paying close attention to several key areas:

1. Capital Expenditure Plans for 2026: Will Amazon maintain its aggressive spending pace, or will it signal a moderation in AI infrastructure investment?

2. AWS Growth Trajectory: The pace of AWS growth will provide crucial insights into whether the company’s AI investments are paying off.

3. Retail Segment Performance: How Amazon’s core retail business performs during the crucial holiday quarter will indicate its competitive position.

4. Profitability Metrics: With significant investments in AI and logistics, investors will be watching closely to see how these impact overall profitability.

5. Guidance for 2025: Amazon’s forward-looking statements will be particularly important given the current uncertainty in the tech sector.

The Bigger Picture

Amazon’s earnings report comes at a pivotal moment for the tech industry. The question of whether massive AI spending will ultimately be worth it looms large over the entire sector. Amazon’s results could provide valuable insights not just for its own investors, but for the broader tech ecosystem.

The company’s unique position—simultaneously a tech infrastructure provider, an AI innovator, and a retail giant—makes its earnings particularly significant. How Amazon balances these different aspects of its business while navigating intense competition and massive technological change will be closely watched.

As we await Thursday’s earnings report, one thing is clear: Amazon stands at a critical juncture. The decisions it makes regarding AI investment, workforce management, and competitive strategy will shape not just its own future, but potentially the future of the entire tech industry.

Check back Thursday afternoon for comprehensive coverage of Amazon’s earnings and what they mean for the company, the tech sector, and the broader economy.

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