Amazon's Cloud Business Is Accelerating. Time to Buy the Stock?

To most consumers, Amazon (NASDAQ: AMZN) may be best known for its e-commerce business. But to investors, attention usually gravitates to the company's cloud computing business -- especially recently.

Releasing its fourth-quarter results after market close on Thursday, Amazon's cloud computing business, Amazon Web Services (AWS), saw yet another quarter of accelerating growth. In fact, the 24% year-over-year growth the segment posted during the period was the fastest it has delivered for shareholders in 13 quarters.

Despite Amazon's meaningful acceleration in its high-margin cloud computing business in Q4, shares sold off during after-hours trading on Thursday, falling about 10% as of this writing.

With the stock selling off even though Amazon's important cloud business is accelerating, is this a buying opportunity for investors?

Image source: Getty Images.

Amazon's Q4 earnings: What investors should know

After posting 13% year-over-year revenue growth in Q3 and guiding for 10% to 13% growth during the e-commerce and cloud-computing giant's important holiday quarter, Amazon revealed on Thursday that net sales for the period exceeded its guidance range, rising 14% year over year to $213.4 billion.

Amazon's online stores and third-party services revenue, which together do a good job of capturing the company's sprawling e-commerce business, rose 10% and 11%, respectively, during the period. Online stores' revenue for the period was about $83.0 billion, while third-party seller services revenue was approximately $52.8 billion.

The company's physical store revenue, which accounted for just $5.9 billion of its total quarterly revenue, rose 5% year over year.

But where the quarter really shone was in its higher-margin segments. Amazon's subscription services revenue rose 14% year over year to $13.1 billion, advertising services revenue increased 23% to $21.3 billion, and AWS revenue jumped 24% to $35.6 billion.

Given this financial momentum, Amazon expects more robust overall business momentum in Q1. Specifically, management guided for first-quarter revenue to rise 11% to 15% year over year.

Big growth from the AI boom

Highlighting the company's momentum in the cloud, its 24% year-over-year growth in AWS marked an acceleration from the segment's 20% growth in Q3.

Showing how far Amazon's AWS business has come, this growth rate is well above the company's full-year 2024 AWS revenue growth rate of 19% year over year.

Much of this growth, of course, is fueled by the market's seemingly insatiable appetite for AI computing. But what's especially impressive is that this is also showing up in AWS's chips business, with CEO Andy Jassy noting in the company's fourth-quarter earnings release that its chips business is growing at a triple-digit year-over-year rate.

Perhaps explaining why the market is reacting negatively to this report in after-hours on Thursday, this growth in cloud may be exciting, but it's capital-intensive.

"With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low earth orbit satellites," explained Jassy in the earnings release, "we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital."

This is far higher than the company's approximately $128 billion in capital expenditures, net of proceeds from sales and incentives, in 2025. And showing just how much the company's financial profile is changing, even this $128 billion figure was up massively from the prior year (a 65% year-over-year increase).

So, is Amazon stock a buy now? While shares aren't a clear bargain after the sell-off, the overall long-term risk-reward does seem attractive at the stock's current valuation. However, given the company's changing financial profile, investors should consider viewing the stock as risky and keep any position small.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.