Amazon is poised to make history on Thursday evening when it reports fourth-quarter 2025 results, becoming the first company to generate more than $700 billion in annual revenue. But for investors, the real story lies in Amazon Web Services, where a $200 billion backlog signals unprecedented demand for cloud and AI infrastructure.

The stakes for Thursday's report are enormous. Amazon's stock has recovered from its January doldrums but remains well below last year's highs, with investors seeking clarity on whether AI investments will drive growth acceleration or margin compression in 2026.

The AWS Juggernaut

Amazon Web Services delivered $33 billion in Q3 2025 revenue, representing 20.2% year-over-year growth—the division's highest growth rate in 11 quarters. More importantly, AWS generated $11.4 billion in operating income, demonstrating an ability to maintain profitability while aggressively scaling AI capacity.

The $200 billion backlog—representing committed customer contracts that haven't yet been recognized as revenue—provides exceptional visibility into future growth. This figure has grown substantially from $155 billion a year ago, driven primarily by multi-year AI infrastructure agreements with major enterprises.

"The AWS backlog is the single most important number in cloud computing. At $200 billion, it represents years of growth runway that's already been contracted and committed."

— Cloud Infrastructure Analyst, Major Investment Bank

AI Infrastructure Arms Race

Amazon raised its full-year 2025 capital expenditure guidance to $125 billion in October, with management explicitly stating that spending will increase further in 2026. Estimates suggest 2026 capex could exceed $150 billion, with the vast majority directed toward AWS AI infrastructure.

This level of investment reflects the intensity of competition among cloud hyperscalers. Microsoft Azure has been growing at 40% and Google Cloud at 34%, both outpacing AWS. Amazon can't afford to cede ground in AI infrastructure, even if it means temporarily sacrificing margins.

Thursday's call will provide crucial details on how Amazon views the return on these investments and whether the AI spending trajectory will moderate in coming quarters.

Retail: Steady But Unspectacular

Amazon's retail operations are expected to deliver solid but unremarkable results. The company's fourth-quarter guidance projected total revenues between $206 billion and $213 billion, representing 10% to 13% growth.

E-commerce competition has intensified, with Walmart's digital sales growing faster than Amazon's in recent quarters. Temu and Shein continue to gain market share among price-conscious consumers. Amazon's response has included faster delivery, expanded Prime benefits, and increased advertising—all of which pressure margins.

Investors will scrutinize retail operating margins for signs of whether Amazon's efficiency initiatives are offsetting competitive pressures.

The Margin Question

Perhaps the most closely watched metric will be AWS operating margins. The cloud division achieved an all-time high margin of 39.5% in Q1 2025, but that level may be difficult to sustain given the massive investments in AI infrastructure.

Amazon faces a challenging comparison: the December 2024 quarter saw AWS operating margin of 36.9%, and any significant decline from that level could raise questions about whether AI investments are generating adequate returns.

"There are two tough AWS operating margin compares ahead. The market will forgive some margin compression if it's accompanied by acceleration in revenue growth, but investors want to see that the AI investments are translating into customer wins."

— Amazon Analyst, Wall Street Research Firm

Competition From All Directions

Amazon faces intensifying competition across every business line:

  • Cloud: Microsoft Azure and Google Cloud are growing faster, with Anthropic's direct enterprise offerings adding new competitive pressure
  • Retail: Walmart's omnichannel strength, Temu's aggressive pricing, and Shopify's merchant tools are all gaining ground
  • Advertising: TikTok and connected TV platforms are capturing incremental ad dollars
  • AI: While Amazon has Bedrock and Anthropic investments, it lacks the proprietary model IP of Google, Microsoft (via OpenAI), or Apple

The breadth of competitive challenges makes execution more difficult than at any point in Amazon's recent history.

What Wall Street Expects

Consensus estimates call for fourth-quarter earnings per share of approximately $1.85 on revenue of around $209 billion. For the full year, Amazon is expected to have grown EPS by 29% and revenue by 12%.

Looking ahead, the Zacks Consensus Estimate for Amazon's 2026 earnings is $7.85 per share, representing 9.5% growth from 2025. That's solid but hardly spectacular for a company investing so aggressively in AI.

Key Questions for Thursday's Call

Investors will be listening closely for answers to several critical questions:

  • AI demand trajectory: Is the AI infrastructure buildout accelerating, stabilizing, or showing any signs of cooling?
  • Capex guidance: What's the 2026 capex forecast, and how does management frame the return on these investments?
  • Competitive positioning: How is Amazon responding to faster growth at Azure and Google Cloud?
  • Retail margins: Can Amazon maintain profitability in retail amid intense competition?
  • Prime growth: Are Prime membership and engagement metrics still improving?

The Bull and Bear Case

Bulls argue: The $200 billion AWS backlog provides exceptional growth visibility. AI infrastructure demand remains insatiable. Amazon's scale advantages in retail and logistics are durable. At current valuations, investors aren't paying much for the AI optionality.

Bears counter: AWS margins face sustained pressure from AI investments without clear profitability timeline. Retail growth is slowing while competition intensifies. Capex requirements are enormous relative to free cash flow generation. Regulatory risks loom over the entire business.

The Bottom Line

Thursday's earnings report will be among the most consequential in Amazon's history. Crossing $700 billion in annual revenue is a remarkable achievement, but investors are focused on whether the massive AI investments underway will drive the next leg of growth.

The $200 billion AWS backlog suggests customers remain committed to Amazon's cloud platform despite competitive threats. Whether that commitment translates into profitable growth—or merely growth—will determine whether Amazon's stock can reclaim its former heights.

After hours on Thursday, we'll have answers. Until then, Amazon's AI bet remains the biggest story in cloud computing.