Alphabet and Amazon earnings previews: What’s happening to margins?

Alphabet Q4 earnings preview

According to Visible Alpha consensus, Alphabet Inc.'s (NASDAQ: GOOG) total revenues expected for Q4 2025 have increased to $111.4 billion from $108.8 billion last quarter, driven by resilience in its ad business and potential strength in Google Cloud. In addition, the Q4 consensus expectations for operating income and EPS have also increased, due to a higher Cloud margin expectation. Since July 2025, the Google Cloud margin has expanded from 19.4% to 23%. Questions have been emerging about the impact of AI on its core search business and have started to impact overall top line growth estimates. However, consensus EPS of $2.64/share ranges from $3.01 to $2.43 for Q4, driven by differing assumptions around costs, particularly in its Cloud business. It will be interesting to hear what Alphabet says about the outlook.

We are closely monitoring the trend of the Cloud business. The operating profit margin has been trending better. Looking ahead to Q1 2026, analysts now expect the Cloud business to generate a 22.0% operating profit margin, up 400 bps year over year but 100bps lower since last quarter. However, the estimates range from $1.9 billion to $4.4 billion in Q1 2026, signaling divergent views about the performance of this business. Longer term, analysts are also split in their views. For the Cloud business, Visible Alpha consensus expects the operating profit margin to hit 24.1% in FY 2026 but with a significant range of estimates. If the core Search and Ads business remains resilient, the performance of Alphabet stock is likely to be driven by the Cloud segment.

We are closely watching what the company will say about its investments into AI, as Alphabet’s FY 2026 CapEx numbers have continued to increase. According to consensus projections, CapEx estimates have nearly quadrupled from $32.3 billion in FY 2023 to $120.8 billion in FY 2026.

Alphabet stock has traded up 35.0% since the October release and up 78.6% in 2025, outperforming the S&P 500’s 14.8% return. The consensus P/E for 2027 is 26x. The stock has remained resilient, driven consistent growth in ads and by margin expansion in its Cloud business. Could the Q4 release provide more visibility into the trajectory of Q1 and 2026 profitability and give shares a further boost?

Amazon Q4 earnings preview

According to Visible Alpha consensus, Amazon.com Inc.'s (NASDAQ: AMZN) total revenues of $211.6 billion expected for Q4 have remained steady since the October release, driven by resilience in Amazon’s online retail business. Expectations for both the North America and International online retail segments have remained stable since last quarter. Consensus for AWS also has remained around $34.8 billion. The focus will likely be on the Q1 2026 performance and full year’s outlook for the online retail and AWS margins and their impact on EPS growth.

The North America retail operating profit margin has increased significantly from losses a few years ago to an estimated 8.5% for Q4 2025. Operating margin expectations for North America have edged higher since spring but are lower than the 7.1% margin initially targeted in January this year. For Q4, the estimated margin range has widened to 3.8% to 10.2%, with consensus at 8.5%.

AWS margin came in at 34.6% last quarter, and for Q4 is expected to remain at that same level. It has come down from the 36.1% level expected in October. The range of estimates for the Q4 AWS margin has narrowed to 32.6% to 37.6% with consensus at 34.6%.

We are closely watching what the company will say about its investments into AI, as Amazon’s FY 2026 CapEx numbers have continued to increase. According to consensus projections, CapEx estimates have more than doubled from $52.7 billion in FY 2023 to currently $148.1 billion in FY 2026.

The stock has traded up 7.4% since last quarter but is up only 8.7% since last January, significantly underperforming the S&P 500’s 14.8% return. The consensus P/E for 2027 is 24x. Could the Q4 release provide a positive catalyst for the stock?

 This article was published by Visible Alpha, part of S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.