Although Amazon’s revenue came in above expectations, the stock fell in after-hours trading as earnings per share were slightly below forecasts and free cash flow dropped sharply. The e-commerce and cloud computing giant reported fourth-quarter 2025 revenue of $213.4 billion, above analysts’ forecast of $211.27 billion, representing 14% year-on-year growth. However, earnings per share were $1.95, slightly below the expected $1.96.

Growth was spread across three major business segments: North America contributed 59% of total revenue, International accounted for 17%, and AWS made up 24%. AWS continued to be the company’s fastest-growing and most profitable segment.

Operating profit in the fourth quarter of 2025 rose to $24.9 billion, up 18% year on year, although several special items reduced operating profit. These items included $1.1 billion related to a tax dispute and litigation settlement tied to Amazon’s store operations in Italy, $730 million in expected severance costs, and $610 million in asset impairments primarily related to physical stores.

Quarterly net profit rose more modestly on a year-on-year basis, up 6% to $21.1 billion. However, on a trailing twelve-month basis, net profit showed stronger growth of 31%, totaling $77.6 billion.

As Amazon’s largest source of revenue, the North America segment remained solid, with net sales up 10% year on year in the fourth quarter of 2025. Operating profit for the segment grew more strongly, rising 24%.

Amazon Web Services (AWS) continued to be the company’s fastest-growing and most profitable business. AWS delivered net sales of $35.5 billion in the fourth quarter of 2025, a notable 24% increase from the prior year. AWS operating profit reached $12.4 billion, up 17% year on year.

During the earnings call, the CEO highlighted the transformative potential of artificial intelligence. The company also detailed growth in AWS backlog, which has now reached $244.0 billion, up 40% year on year, underscoring strong demand for cloud services.

Amazon’s financial performance shows the company is investing aggressively in future growth, most clearly reflected in free cash flow. Despite a 20% increase in operating cash flow, trailing twelve-month free cash flow plunged 71% year on year. Spending on property and equipment reduced free cash flow.

These figures align with guidance referenced during the earnings discussion. Amazon plans to invest roughly $200 billionin capital expenditures, focusing on doubling power capacity by the end of 2027 and continuing aggressive investment in AI and cloud infrastructure.

Market Interpretation:

The company faces several challenges ahead, including supply chain disruptions, intensifying competition in cloud computing, economic uncertainty affecting consumer spending, regulatory scrutiny, and currency volatility. However, with its diversified business model and strong growth from high-margin segments such as AWS, Amazon appears well positioned to navigate these challenges while continuing to invest in future growth opportunities.