Amazon Earnings: Guidance for $200 Billion in Capital Expenditure in 2026 Overshadows Good Results

Key Morningstar Metrics for Amazon

• Fair Value Estimate: $260
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Amazon’s Earnings

Amazon AMZN reported fourth-quarter results that beat the high end of guidance on the top line and came in a shade under that on operating profit. Sales grew 14% year over year in constant currency to $213.4 billion, while operating margin was 11.7% versus 11.3% a year ago.

Why it matters: Results are good, with upside on top and bottom lines. Consumer spending is tracking recent-quarter trends, as the expansion of grocery and same-day delivery is spurring demand, while AWS drove revenue upside relative to our expectations.

• All segments were slightly ahead versus our model, with physical stores in line and AWS more than $1 billion better than anticipated. We do not see any areas of concern with demand and believe results support our positive long-term view on Amazon.
• Operating income was $25.0 billion with a margin of 11.7%, compared with the high end of guidance at $26.0 billion. Excluding various one-time charges, operating income would have been $1.1 billion higher.

The bottom line: We maintain our fair value estimate of $260 for wide-moat Amazon. While results were good, guidance was shy on operating profit. Paired with capital expenditure guidance, these flow through our model, holding valuation steady. Still, given the recent selloff, we view shares as attractive.

• AWS was strong, with growth accelerating to 24% year over year, and is now at a $142 billion annual run rate. The surging demand spans both traditional and artificial intelligence workloads and drives management’s decision to accelerate investment into their most important segment.

Coming up: The outlook for first-quarter revenue is in line with our expectations, but operating income is light, resulting in slight decreases to our near-term estimates. The midpoint of guidance calls for revenue of $176 billion and operating profit of $19 billion.

• Management guided to $200 billion in capital expenditure in 2026, which we think will limit more meaningful margin expansion over the next several years.