Image Source: TradingView
By Brian Nelson, CFA
Amazon (AMZN) recently reported mixed fourth quarter results with revenue coming in better than expected, but GAAP earnings per share missing the mark. Net sales for the quarter increased 14%, to $213.4 billion, with AWS segment sales increasing 24% year-over-year, to $35.6 billion. Adjusted operating income in the fourth quarter came in at $27.4 billion compared with $21.2 billion in the fourth quarter of 2024. North America segment operating income was $11.5 billion, compared to $9.3 billion in the year-ago period, while AWS segment operating income was $12.5 billion, compared to $10.6 billion in last year’s quarter. Net income increased to $21.2 billion in the fourth quarter, or $1.95 per diluted share, compared with $20 billion, or $1.86 per diluted share, in same period a year ago.
Management had the following to say about the results:
AWS growing 24% (our fastest growth in 13 quarters), Advertising growing 22%, Stores growing briskly across North America and International, our chips business growing triple digit percentages year-over-year—this growth is happening because we’re continuing to innovate at a rapid rate, and identify and knock down customer problems. With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low earth orbit satellites, we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital.
Amazon’s operating cash flow for the trailing twelve months ended in the fourth quarter of 2025 came in at $139.5 billion, up 20%, while capital spending over the same time horizon came in at $128.3 billion, up 65%. Free cash flow fell to $11.2 billion on a trailing twelve month basis, down more than 70% year-over-year. Amazon ended 2025 with $123 billion in cash and marketable securities and long-term debt of $65.6 billion.
Looking to first quarter guidance, net sales are expected to be between $173.5-$178.5 billion, or to grow between 11%-15% compared with the first quarter of 2025. Operating income is expected to be between $16.5-$21.5 billion, compared with $18.4 billion in the first quarter of 2025. Amazon’s $200 billion capital-expenditure guidance for 2026 will likely drive free cash flow into negative territory on the year, but we still like its long-term free cash flow potential. We’re not making any changes to the Best Ideas Newsletter portfolio.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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