Amazon stock sinks despite AWS beat in Q4: should you buy the dip?

Amazon.com Inc (NASDAQ: AMZN) is slipping in extended hours even though the titan recorded a massive revenue beat and a standout performance from its cloud division in its fiscal Q4.

The multinational posted $213.39 billion in revenue, handily above the $211.33 billion expected.

But a razor-thin miss on earnings per share (EPS) and a jaw-dropping capex guidance wiped billions off its market cap late on Thursday.

However, the earnings release offered ample reasons for long-term investors to build or grow their positions in Amazon stock on the post-earnings dip, especially now that it’s down some 20% versus its 52-week high.

Why massive capex doesn’t warrant selling Amazon stock

AMZN stock retreated after-hours mostly because executives said capital expenditures were expected to hit $200 billion this year, more than $50 billion higher than analysts’ forecast.

While the “sticker shock” of such a massive number can be daunting, long-term investors should view this not as a drain, but as a defensive moat.

CEO Andy Jassy is clearly signaling that the generative AI revolution is a “once-in-a-generation” opportunity that requires immediate, heavy lifting in data centre infrastructure.

History shows that when Amazon spends big – whether on Prime shipping or AWS’s early days – it eventually yields dominant market share and high-margin returns.

This isn’t reckless burning of cash; it’s the construction of the digital backbone for the next decade of computing.

And it’s not like the investments aren’t already proving rewarding.

Amazon Web Services (AWS) brought in a remarkable $35.58 billion in Q4, even beating the 23% year-on-year growth mark that some analysts ahead of the print said was a must-beat to impress investors.

Therefore, the capex guidance isn’t reckless burning of cash; it’s the construction of the digital backbone for the next decade of computing.

Why EPS miss doesn’t matter much for AMZN shares

While a $1.95 EPS against a $1.97 estimate triggered the initial sell-off, savvy investors know that Amazon’s long-term trajectory is dictated by one engine: AWS.

The cloud unit didn’t just beat – it accelerated to $35.58 billion, proving that the core profit centre is thriving, which made Bernstein’s senior analyst Mark Shmulik reiterate that AWS holds a unique edge over rivals.

“Amazon has the potential to bring on more cloud capacity than any of its big rivals in the coming two years, which creates a sustainable long-term buildout advantage with deep long-standing relationships across the supply chain and continued best-in-class non-AI compute infrastructure to complement.”

Bernstein maintains its $300 price target on Amazon shares, indicating potential upside of a whopping 50% from here.

How to play Amazon.com Inc after Q4 earnings?

Beyond the headlines, the bull case for AMZN shares remains remarkably intact.

AWS didn’t just meet expectations; it accelerated to $35.58 billion, proving that enterprise cloud migration and AI workloads are fueling a powerful second wind for the segment.

Meanwhile, the advertising business continues to be a high-margin powerhouse, raking in $21.32 billion as it outpaces traditional digital ad rivals.

With the stock trading at a more attractive valuation following the post-earnings 10% haircut, investors are essentially getting a world-class AI play and a dominant global retail leader at a discount.

Between efficiency gains in its logistics network and a massive AWS backlog, Amazon’s “dip” looks less like a falling knife and more like a spring-loaded opportunity for those with a long-term horizon.

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