- Amazon posted $213.4 billion in Q4 net sales, a 14% year-over-year increase, driven by growth across all major segments.
- Operating income rose to $25.0 billion, but this included $2.4 billion in special charges (tax settlements, severance, asset impairments). Underlying profit strength was higher.
- While annual operating cash flow grew 20% to $139.5 billion, free cash flow plummeted to $11.2 billion, which the company directly attributed to massive capital investments, primarily in AI infrastructure.
In the 1990s, Amazon built a sprawling network of warehouses, even though skeptics questioned the strategy. Today, a similar pattern appears to be unfolding, but the focus has shifted from physical boxes to data centres and artificial intelligence.
Amazon’s fourth quarter of 2025 revealed record sales of $213.4 billion, a sign of its enduring market presence. However, the announcement that followed was a plan to spend approximately $200 billion in 2026, shifting attention from current revenue to future investment in an unproven technological race.
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A Quarter of Pure Momentum
Let’s start with what went right. The Q4 of 2025 was a testament to Amazon’s enduring dominance. Global net sales surged 14% to $213.4 billion, a growth spurt fuelled by consistent strength across all its kingdoms. In North America, sales rose 10% to $127.1 billion, powered by what the company called "brisk" growth in its core online stores and the relentless expansion of its advertising business.
The international segment saw an even sharper 17% jump to $50.7 billion. A chunk of that growth, about 6 percentage points, came from a favorable swing in foreign exchange rates, but even without that currency tailwind, underlying sales were up a solid 11%, showing real momentum in overseas markets.
The crown jewel, however, was Amazon Web Services (AWS). After quarters of growth that had investors nervously tapping their feet, the cloud division roared back. AWS revenue accelerated to 24% year-over-year growth, hitting $35.6 billion. This wasn't just a minor uptick, as it was the division's fastest growth in thirteen quarters.
On the earnings call, CEO Andy Jassy pinned this revival on two trends. First, a resurgence in "core non-AI workloads" as big companies finally resumed their long-delayed migrations from their own expensive data centers to the cloud. Second, and more critically, an exploding demand for AI services, which Jassy noted often leads customers to spend more on AWS's foundational services as well.
A Strong Engine, Costly Repairs
Beneath the stunning sales figures, though, the profit picture required a bit more deciphering. Operating income for the quarter increased to $25 billion, up from $21.2 billion a year prior. But that clean growth was muddied by what Amazon termed "special charges"—three separate, costly events that carved $2.4 billion out of the quarter's profits.
The first was a $1.1 billion charge to settle long-running tax disputes in Italy and a separate lawsuit, a costly but final resolution to legal headaches. The second was a $730 million hit for estimated severance costs, a sobering reminder of the layoffs that have rippled through the tech giant over the past year.
The third, a $610 million charge for asset impairments, was largely tied to the diminishing value of physical stores, a segment Amazon has been quietly scaling back. The company was quick to note that without these one-time hits, operating income would have been a much stronger $27.4 billion. This clarification was crucial as it showed that the core business engine was actually more profitable than the headline number suggested.
But the most telling signal of the spending storm ahead was found in the cash flow statement. For the full year 2025, operating cash flow was a robust $139.5 billion, up 20%. But free cash flow, the real money left over after funding all of its ambitious projects, collapsed to $11.2 billion from $38.2 billion the year before.
The reason for this cliff-like drop was stated with zero ambiguity in the earnings report: "This increase primarily reflects investments in artificial intelligence." In plain terms, Amazon is vacuuming up its legendary cash generation and funneling it directly into building the AI infrastructure of tomorrow.
Louis Eriakha
The AI Arms Race: Betting the House on Homegrown Chips
So, what does a $50-billion-plus annual increase in capital spending actually buy? A large part of the answer lies in Amazon's aggressive push into custom silicon. For years, the company watched as rivals and customers grew dependent on a single supplier, NVIDIA, for the advanced chips needed to train and run AI models. Amazon's response was to build its own, and the Q4 2025 results suggest that gamble is starting to pay off spectacularly.
Jassy revealed that Amazon's in-house chip business, encompassing its Trainium AI chips and Graviton CPUs, has now reached an annual revenue run rate of over $10 billion and is growing at a "triple-digit percentage." This isn't just a side project; it's becoming a foundational advantage.
He explained that their second-generation AI chip, Trainium2, is already "fully subscribed," with 1.4 million units deployed, and it now powers most of the inference traffic on Amazon's Bedrock AI platform. The reason for this rush? Price. "Trainium2 is 30 to 40% more price performant than comparable GPUs," Jassy stated, offering customers a compelling reason to choose Amazon's ecosystem to avoid the soaring costs of the AI boom.
The scale of their ambition was crystallised in another Q4 milestone: the activation of "Project Rainier," a supercomputing cluster packed with over 500,000 Trainium2 chips. Jassy called it "the world’s largest operational AI compute cluster," and it's being used by Anthropic to train its Claude AI model. This isn't just R&D, but a statement of capability to every corporation and startup wondering where to build their own AI future.
The $200 Billion Spend
Amazon guided that it “expects to invest about $200 billion in capital expenditures across Amazon in 2026.” This was far above Wall Street expectations and may explain the after-hours stock dip—investors could have been stunned by the scale.
Jassy positioned this not as a wild guess, but as a direct response to Q4 2025 and current demand signals. “We have very high demand. Customers really want AWS for core and AI workloads. And we are monetizing capacity as fast as we can install it,” he argued.
CFO Brian Olsavsky echoed this on the call, specifically linking it to their Q4 and recent experience: “In 2025, AWS added more data center capacity than any other company in the world.” The $200 billion is simply the next logical, if breathtaking, step.
Ogbonda Chivumnovu
