What to watch for in Q4 earnings call
Investors will focus on several critical areas during the announcement:
Capital expenditure trajectory and cash flow outlook
Amazon raised full-year 2025 capex guidance to $125 billion in October, with management explicitly stating spending will increase further in 2026. Estimates suggest 2026 capex could exceed $150 billion, primarily directed towards AWS AI infrastructure. With free cash flow under severe pressure, investors will scrutinise whether Amazon can articulate a credible path to improved cash generation or whether the company will increasingly rely on debt markets to finance expansion.
AWS competitive positioning
Whilst AWS’s 20% growth represents reacceleration, Microsoft Azure and Google Cloud are gaining ground at 40% and 34% respectively. AWS maintains market leadership with approximately 30% share, but competitors are narrowing the gap. Investors will seek clarity on whether AWS can sustain elevated growth rates, particularly given capacity constraints. Management commentary on competitive dynamics, pricing strategy, and the $200 billion backlog conversion timeline will be closely monitored.
AI chip adoption
Amazon’s Trainium chips, designed in-house for AI model training and inference, represent a strategic initiative to reduce dependency on Nvidia whilst offering customers superior price-performance economics.
However, Chief Executive Officer (CEO) Andy Jassy acknowledged that ‘Trainium is being used by a small number of very large customers’, with Anthropic’s Project Rainier—currently utilising nearly 500,000 Trainium2 chips and expected to scale beyond one million shortly—representing the flagship deployment. Investors require evidence of broader customer adoption beyond Anthropic to validate the substantial research and development investment.
Holiday quarter performance
The fourth quarter represents Amazon’s most critical retail period, encompassing Prime Big Deal Days in October, Black Friday and Cyber Monday in late November, and the Christmas shopping season. Following a record-breaking Prime Day in July, investors will scrutinise whether Amazon maintained momentum through these concentrated peak demand periods. Performance against the company’s Q4 revenue guidance of $206-213 billion will signal retail strength amid intensifying competition from Walmart, Temu and Shein, which have pressured Amazon’s margins.
Improved analyst conviction
Wall Street analyst sentiment is generally positive, with 67 ‘strong buy’ or ‘buy’ ratings out of 71 analyst ratings. The average target price has increased from $267 before Q3 earnings to $293, which represents a 20% upside from current levels.