Amazon (AMZN 1.52%) shares sank despite the company reporting strong fourth-quarter results, as it will invest aggressively in its Amazon Web Services (AWS) cloud computing business. The stock is now down more than 10% year to date. However, my prediction is that this dip will be a great buying opportunity for long-term investors and that the stock will end the year higher.
Let's take a closer look at the e-commerce giant's latest results and prospects, and why the stock looks like a buy.
NASDAQ: AMZN
Key Data Points
AWS growth accelerates
AWS is both Amazon's largest segment by profitability and its fastest-growing. The segment saw its revenue growth accelerate in the quarter, with AWS revenue climbing 24% to $35.58 billion. It was the fastest pace of growth in more than three years for AWS, and ahead of the $34.93 billion revenue consensus as compiled by StreetAccount. AWS' operating income, meanwhile, rose 18% to $12.5 billion.
Amazon credited the growth to strong demand for artificial intelligence (AI) infrastructure, but also said that core non-AI workloads were stronger than expected. It called out its AI solutions as also helping drive growth, saying Bedrock spending surged 60% sequentially. It also said it is seeing strong demand for its custom Trainium chips and expects commitments for the chips to be sold out by mid-year.
Like other hyperscalers, Amazon decided to greatly ramp up its capital expenditure (capex) spending for 2026, with plans to take it from $132 billion in 2025 to $200 billion this year. Much of this will go toward AI data centers, but some of the spending will also go toward robotics and Project Kuiper (low-earth-orbit satellites).
On the consumer side of its business, Amazon's North America sales jumped by 10% year over year to $127.1 billion, while international sales climbed 17%, or 11% in constant currencies, to $50.7 billion. Advertising continues to help drive growth, with its ad revenue rising 22% to $21.3 billion, led by its sponsored ad business.
The company continued to see strong operating leverage in its North American e-commerce operations, with its operating income for its North American segment surging 24% to $7.3 billion. Its international segment posted operating income of $1 billion versus $1.3 billion a year ago, but was hurt by a number of one-time charges.
Overall, Amazon's revenue increased by 14% year over year to $213.39 billion, which came in above the $211.33 billion analyst consensus, as compiled by LSEG. Earnings per share rose 5% to $1.95, which missed analyst expectations of $1.97. However, this is not the typical adjusted earnings per share number that most companies provide. It includes some one-time charges, such as the resolution of a tax matter and asset impairment.
Looking ahead, Amazon forecasted first-quarter revenue to be between $173.5 billion and $178.5 billion (between 11% to 15% growth).
Image source: Getty Images.
Time to buy the stock
While the stock fell on its capex plans, Amazon is hitting on all cylinders. AWS revenue is accelerating, while it's seeing great operating leverage in its e-commerce operations, helped by its investment in AI and robotics. Meanwhile, the stock is trading at one of the most attractive valuations in its history, with a forward price-to-earnings ratio of about 26 times 2026 analyst estimates.
Between the growth ahead and its valuation, my prediction is that the stock will be much higher by the end of the year. As such, I'd be a buyer on this dip.
