Amazon (AMZN) Earnings Thursday: AWS, Ads, Margins, Guidance

 

• Amazon (AMZN) is set to report their Q4 FY2025 earnings this Thursday, February 5, after market close. 

• Analyst consensus expectations call for an earnings per share (EPS) of $1.97 on revenue of $211.4 billion.

• AMZN had a ho-hum 2025 in the stock market, finishing the calendar year up just 1.8%.

 

State of the Jungle

Despite weak gains in the stock market for the 2025 calendar year, Amazon improved profitability across both retail and Amazon Web Services (AWS) at rates that outpaced their gains in share price. Operating margins also expanded on lower fulfillment costs per unit, regionalized shipping, and stronger cash flow in advertising. 

 

AWS growth was primarily driven by ever-increasing AI demand, bedrock cloud workloads, and cost headwinds fading as more datacenters are established. That said, management has emphasized continuing to keep capital expenditure (capex) high for datacenters, power, and networking. 

 

Advertising remains a bright spot and revenues continue to climb, with marketplace advertising products, Prime Video advertisements, and selling ad space on boxes adding a second tailwind to retail margins. 

 

Catalysts on Deck

AWS Pulse: Bedrock, GPUs, Bookings

AWS is Amazon’s quiet cash cow, driving almost 17% of overall revenue. Bedrock, Amazon’s generative AI, has started to become a significant piece of that 17%. Commentary on the pace of AWS growth quarter-over-quarter (QoQ) and year-over-year (YoY), training vs. inference mix, Bedrock adoption, and uptake of the company’s line of chips (Graviton, Inferentia, Trainium) will be big. 

 

Additionally, bookings, remaining performance obligations, any further information on partnerships with other major brands, or optimization churn rolling off all fall into this category and will pique the interest of investors. 

 

Ads Engine: Marketplace + Prime Video

Advertising has also quietly become a considerable revenue stream for Amazon, making up almost 10% of the company’s income last year. Leadership’s commentary on marketplace advertising revenue trajectory, along with auction and pricing dynamics, could move shares. 

 

Prime Video advertising is the biggest piece of this revenue segment, and the advertising ramp there, including reach, frequency caps, and early yield, will come into play. Investors will be listening closely to hear whether the Prime Video advertising budget and revenue is incremental or substitutive to retail advertising. 

 

Same-Day/Next-Day Coverage Tracker

Amazon has come to dominate e-commerce as it pertains to shipping speed; investors will be curious to hear about expansions in same-day and next-day coverage, cost per unit, and delivery speed metrics. Shopping volumes will also obviously matter; basket size and frequency trends, especially among lower-income demographics, along with any commentary on promotional intensity will all be very important. 

 

Overseas Scorecard: Europe/India

Investors will also look for any progress in Amazon’s European and Indian divisions, where the company has been aggressively expanding. Cross-border shipping and import fee dynamics, and their impact on unit margins, will be particularly prevalent in the current environment of tariff uncertainty. Any macroeconomic or foreign exchange headwinds that come into play will also need to be priced in. 

 

Spend Now, Cash Later?

For most companies, AI means spending, and Amazon is no exception. The 2026 capex path for datacenters and logistics and any power procurement updates could move shares, as could management’s free cash flow cadence and any adjustments to the repurchase authorization. 

 

Tone, Targets, and Caveats

With this being Amazon’s final report for the 2025 fiscal year, investors will be eager to hear what their plans are for 2026. Targets for revenue and operating income, AWS growth guardrails, advertising growth goals, and retail margin guardrails for the 2026 fiscal year will all need to be priced in and will play a major role in determining what move AMZN takes following this call. Furthermore, any notes on supply chain, inventory health, and seasonal demand - or the normalization thereof - will have an impact. 

 

What Sets Next Year’s Tone

Turning Capex into Contracts

Investors have no problem with heavy spending on AI development in the medium term, but the key becomes turning that abundant capex into durable AWS revenue. Managed model services like Bedrock, vector databases, and major partnerships all determine how quickly the juice will become worth the squeeze, and investors will be watching for proof points that inference spend is scaling beyond the early pilots that have already been priced in. 

 

Robots, Routes, and Unit Costs

A big question mark for Amazon right now, that the company hopes to answer in 2026, is whether regionalized fulfillment and automation can keep cost per unit falling while discretionary demand remains choppy. 

 

Another such question that the company hopes to answer on the same timeline is whether storefront innovations, like Buy with Prime and various subscription perks, can increase shopping frequency without requiring additional promotional spending. 

 

AMZN Earnings Trade Idea

Amazon has been rangebound between the 215 and 250 level since June of 2025, and also has only gone outside of the expected move in one of their last four earnings calls. They are also a Magnificent Seven company, and therefore have top seven - if not top five - analyst coverage on the planet. 

 

If you don’t think that there are any surprises coming for Amazon, a Short Iron Condor on the February 6 expiration cycle, at the $215/$217.5 strikes on the put side and $255/$257.5 strikes on the call side, is a great way to express that sentiment. This trade requires $145 of buying power and will yield a profit of $104 if AMZN closes between $217.50 and $255 at the end of the week. 

 

 

The February 6 expiration cycle isolates this earnings report, while still taking advantage of the premium offered on account of it. $145 of buying power for a $104 profit is a moderate risk:reward profile of 1.41:1, while still encompassing almost the full extent of the expected move.

Gus Downing is host of the tastylive Network show Risk and Reward. @GainsByGus
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