Amazon Web Services (AWS) delivered solid performance in the fourth quarter of 2025, reinforcing its position as Amazon’s most profitable business. However, despite beating revenue expectations, Amazon’s earnings report sparked investor caution due to sharply higher capital expenditure plans tied to artificial intelligence and cloud infrastructure expansion.

The results highlight a broader challenge for big tech companies as they work to meet growing AI demand while managing the rising costs of the infrastructure needed to support it.

Why AWS Earnings Are in Focus

As enterprises accelerate AI adoption, cloud providers like AWS are seeing increased demand for compute, storage, and AI-optimised services. This has placed AWS at the centre of Amazon’s growth story. At the same time, delivering AI at scale requires massive upfront investment in data centres, custom chips, and networking infrastructure, putting pressure on margins and cash flow.

Investors are increasingly scrutinising whether these investments will deliver near-term returns or weigh on profitability.

Strong Revenue Growth From AWS

In the December quarter,Amazon reported total revenue of $213.4 billion, representing a 13% year-over-year increase. AWS remained a key growth driver, generating $35.6 billion in revenue, representing 24 percent year-over-year growth. The cloud unit also continued to contribute a significant share of Amazon’s operating income, highlighting its importance to the company’s financial performance.

AWS growth was supported by rising enterprise cloud migrations, expanding AI workloads, and increased demand for data and analytics services.

Spending Plans Trigger Market Reaction

Despite strong topline results, Amazon’s earnings per share came in slightly below expectations. More importantly, management signalled a sharp increase in capital spending for 2026, with investments focused on AI infrastructure, custom silicon, and global data centre expansion.

The scale of this spending prompted concern among investors, leading to a drop in Amazon’s share price following the earnings announcement. Markets reacted cautiously to the possibility that higher costs could limit profit growth in the near term.

Leadership Stresses Long-Term Strategy

Amazon CEO Andy Jassy defended the investment push, stating that the company is positioning itself for long-term demand in AI and cloud services. Management emphasised that customers are still early in their AI adoption cycles and that sustained infrastructure investment is necessary to capture future growth opportunities.

A Balancing Act Ahead

The Q4 results highlight AWS’s continued strength but also reflect the growing financial demands of the AI era. While revenue momentum remains strong, Amazon now faces the challenge of convincing investors that today’s heavy spending will translate into durable, long-term returns.