Will Amazon's Q4 Earnings Benefit From Healthy AWS Momentum?

Amazon’s AMZN fourth-quarter 2025 results, scheduled to be released on Feb. 5, are likely to reflect gains from its strengthening cloud service offerings.

Amazon Web Services (“AWS”) remains the crown jewel in Amazon's portfolio, with the Zacks Consensus Estimate projecting AWS sales of $35.02 billion for fourth-quarter 2025, indicating robust 21.6% year-over-year growth. 

In the third quarter, AWS revenues (18.3% of sales) rose 20.2% year over year to $33 billion. AWS segment operating income was $11.43 billion, up 9.4% from the year-ago quarter, demonstrating the segment's ability to maintain strong margins even while investing heavily in AI infrastructure. This performance continues to solidify AWS' position as the market leader, competing effectively against Microsoft MSFT Azure, Alphabet GOOGL-owned Google Cloud, and Oracle ORCL. Synergy Research Group reported in third-quarter 2025 that Amazon (29%), Microsoft (20%), and Google (13%) dominated the cloud provider market with a combined 63% market share.

The cloud computing giant is likely to have benefited from several strategic initiatives and product launches executed during the October-through-December period that positioned AWS to capture accelerating enterprise demand for artificial intelligence capabilities.

Click here to know how Amazon’s overall fourth-quarter performance is likely to have been.

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Major Infrastructure Milestones Drive AI Capabilities

The completion and activation of Project Rainier in late October have represented a pivotal achievement for AWS' AI infrastructure ambitions. The massive computing cluster, featuring nearly 500,000 Trainium2 chips deployed across multiple data centers, has gone fully operational with partner Anthropic already running workloads. This $11 billion Indiana-based facility has marked AWS' largest infrastructure project to date, and management has indicated expectations to scale to more than one million Trainium2 chips by year-end. The rapid deployment timeline—completed in less than one year from announcement—has underscored AWS' execution capabilities and has positioned the company to capitalize on surging AI training demand during the crucial fourth quarter.

Re:Invent Announcements Showcase Technology Leadership

AWS' annual re:Invent conference, held from Nov. 30 to Dec. 4, has delivered a wave of product innovations expected to strengthen the company's competitive positioning. The unveiling of Trainium3 UltraServers, powered by AWS' first 3-nanometer AI chip, has offered customers up to 4.4 times more compute performance and four times greater energy efficiency than the previous generation. Major AI customers, including Anthropic, have already begun deploying production workloads on Trainium3, with Amazon Bedrock serving inference requests on the new chips.

The introduction of Graviton5 processors has further expanded AWS' custom silicon portfolio, delivering 25% higher performance than the prior generation with a five-times larger cache. The new Amazon EC2 M9g instances have enabled customers to achieve better price-performance ratios, and over half of the new CPU capacity added to AWS has been powered by Graviton chips for three consecutive years.

Enhanced AI agent capabilities through Amazon Bedrock AgentCore have provided enterprises with improved policy controls, quality monitoring, and natural conversation abilities. The general availability of the Amazon Nova Act has enabled developers to build AI agents for browser-based workflow automation with more than 90% reliability, opening new use cases in form filling, shopping automation, and quality assurance testing.

Growing Customer Demand and Backlog Expansion

AWS has continued to see healthy demand across both AI infrastructure and core cloud services. The segment's backlog has grown to $200 billion by the end of the third quarter, with management noting additional unannounced October deals exceeding the entire third quarter's total deal volume. This strengthening pipeline has suggested sustained revenue visibility. The company has also added more than 3.8 gigawatts of power capacity over the trailing 12 months, with plans to double total capacity again by 2027, demonstrating confidence in long-term demand trends that are likely to have supported fourth-quarter performance.

With these tailwinds, AWS appears well-positioned to deliver solid fourth-quarter results that are likely to reflect the benefits of infrastructure scale-up, technology innovation, and deepening customer adoption across AI and cloud workloads. Amazon carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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