Amazon’s stock experienced a significant drop following the company’s announcement of an ambitious $200 billion capital expenditure plan for the upcoming year. This massive investment, primarily aimed at artificial intelligence infrastructure, overshadowed otherwise solid quarterly results and led to a sharp sell-off by investors concerned about the scale of spending.
Amazon’s stock took a significant hit, falling as much as 10% in after-hours trading and continuing to slide during regular market hours. Investors reacted with alarm to the projected $200 billion in capital expenditures for the year, a substantial increase from the $125 billion spent in the previous year. This figure dwarfs the spending plans of other major tech companies like Meta, Microsoft, and Google.
CEO Andy Jassy defended the aggressive investment, stating, “With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low-earth orbit satellites, we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital.”
The company’s fourth-quarter earnings report revealed net sales of $213.39 billion, slightly above the estimated $211.49 billion. Earnings per share came in at $1.95, narrowly missing the $1.96 estimate. The crucial Amazon Web Services (AWS) segment showed robust growth, with revenue reaching $35.6 billion, surpassing the $34.9 billion expectation and marking its fastest growth in 13 quarters.
However, the cautious outlook for the first quarter’s operating income, projected between $16.5 billion and $21.5 billion against analyst expectations of $22.2 billion, coupled with the immense spending forecast, overshadowed these positive financial metrics.
Market reactions were mixed. Some traders, like Malcolm Ethridge of Capital Area Planning Group, viewed the stock’s decline as a buying opportunity, citing the necessity of such investments for Amazon’s long-term growth, particularly in AI. Brad Gerstner of Altimeter Capital compared the current Big Tech spending to building the “interstate highway system,” expressing confidence in executives’ ability to manage these investments effectively.
Conversely, others, such as Stephen Weiss of Short Hills Capital Partners, expressed concern, noting the uncertainty surrounding the end of this capital expenditure cycle. While Amazon’s stock has seen a significant pullback, it has still doubled over the past three years, indicating a strong long-term performance despite short-term volatility.
Beyond the headline spending figure, Amazon highlighted progress in its custom chip business, with Trainium and Graviton chips reportedly generating an annual revenue run rate of over $10 billion. The company is also focusing on improving delivery speeds, testing 30-minute delivery options, and expanding its grocery business through Whole Foods stores and delivery services, while closing some Amazon Fresh and Go locations.
The company’s advertising business also showed strength, growing 23% year-over-year, boosted by Prime Video and AI-driven ad technology.
