TLDR
- Amazon’s stock witnessed an 11% after-hours drop following a Q4 earnings shortfall and the announcement of a $200 billion capital expenditure plan for 2026
- The $200 billion capex projection far surpasses analysts’ estimates of $146.6 billion and is significantly higher than Amazon’s $131 billion spending in 2025
- Amazon Web Services revenue surged 24% to $35.6 billion in Q4, marking the most rapid growth in 13 quarters
- CEO Andy Jassy defended the spending, citing “very high demand” for AI compute and expressed confidence in strong returns on invested capital
- The tech sector selloff persists as investors grow worried about the massive AI infrastructure spending across Big Tech companies
Amazon stock suffered a heavy blow in after-hours trading on Thursday. Shares plunged by more than 11% following the company’s fourth-quarter earnings report.
The earnings miss wasn’t the only issue. Amazon’s eye-catching capital expenditure forecast sent shockwaves through Wall Street.
The company intends to spend $200 billion in 2026. That is $53 billion more than what analysts anticipated and $69 billion higher than Amazon’s spending in 2025.
This capex figure towers over Alphabet’s already substantial $175 billion to $185 billion range. It is also well ahead of Meta’s projected $115 billion to $135 billion spending plan.
The market’s message was clear. Investors are getting nervous about the amount Big Tech is pouring into artificial intelligence infrastructure.
CEO Defends Massive Spending Push
CEO Andy Jassy faced tough questions from Wall Street analysts during the earnings call. They wanted to know when this spending would start to pay off.
Jassy stood firm in his stance. He stated he was “confident” Web Services would see a “strong return on invested capital.”
“This isn’t some kind of quixotic, top-line grab,” Jassy told investors. He pointed to AWS’s track record of delivering solid returns on capital investments.
The CEO explained the spending is necessary to meet demand. Amazon’s AI compute services are experiencing “very high demand” that requires more data centers, chips, and networking equipment.
AWS added nearly 4 gigawatts of computing capacity in 2025. The cloud unit expects to double that power by the end of 2027.
Cloud Business Shows Strong Growth
Web Services delivered solid results in the fourth quarter. Revenue grew 24% to $35.6 billion, exceeding analyst expectations.
Jassy called it AWS’s “fastest growth in 13 quarters.” The cloud business could have grown even faster with more capacity available.
“We are being incredibly resourceful around that,” Jassy said about meeting the demand constraints. The company is working to scale up its infrastructure as quickly as possible.
Evercore ISI analyst Mark Mahaney pressed Jassy on the spending confidence. He wanted specifics on what gives the CEO certainty about returns.
Jassy described the AI market as a “barbell.” On one end are AI labs consuming massive compute resources. On the other end are enterprises using AI for productivity and cost savings.
The middle section includes businesses building AI applications. Jassy believes this middle segment “very well may end up being the largest and most durable” part of the market.
Barclays analyst Ross Sandler raised concerns about the market being “top-heavy.” Currently, spending is concentrated around a few AI-native labs.
But Jassy sees the market expanding beyond just the big AI developers. More enterprises are starting to deploy AI tools across their operations.
The tech sector took a hit on Thursday even before Amazon’s earnings. The Nasdaq Composite fell 1.59% as Nvidia, Oracle, and others declined.
High U.S. layoffs in January added to market pressure. The S&P 500 dropped 1.23%, slipping into negative territory for 2026.
Amazon’s massive capex follows similar announcements from other tech giants. Microsoft also saw its stock tumble after revealing elevated spending plans.
Some analysts see the selloff as overdone. Dan Ives of Wedbush Securities called concerns about an “Armageddon scenario” far from reality.
Others view the market reaction as healthy skepticism. Stephen Tuckwood of Modern Wealth Management said the decline shows “the market is discerning at this point rather than just irrational exuberance.”
Bitcoin also felt the pressure, briefly dropping below $61,000 on Thursday evening. That marked its lowest level since November 2024, though it recovered to around $65,208.
Amazon’s capital expenditures in 2025 totaled roughly $131 billion. That was already sharply up from approximately $83 billion in 2024.
