Amazon’s stock suffered a significant setback in after-hours trading on Thursday, plummeting more than 11% following the company’s disappointing fourth-quarter earnings report and an extraordinary announcement regarding its future capital expenditures.
The e-commerce giant revealed a staggering plan to spend $200 billion by 2026, shattering analyst expectations that had anticipated $146.6 billion. This figure not only dwarfs the $131 billion Amazon spent in 2025 but also puts it ahead of rivals like Alphabet, which projected expenditures of $175 billion to $185 billion, and Meta’s estimated spending of $115 billion to $135 billion.
Investor anxiety regarding how Big Tech is allocating resources towards artificial intelligence is becoming palpable, especially amid a broader selloff in the technology sector.
CEO Stands Firm on AI Strategy
During the earnings call, CEO Andy Jassy faced pointed inquiries from analysts, who pressed him for insights on when the hefty spending would begin to yield tangible returns.
Jassy maintained a confident stance, asserting that Amazon Web Services (AWS) would deliver a “strong return on invested capital.” He emphasized that this was not merely a hasty move for increased revenue, but rather a strategic decision driven by significant demand in the AI compute market.
He further explained the necessity of the spending to accommodate the rapidly rising need for AI technologies, indicating that AWS’s infrastructure would need to expand to support this surge.
In 2025, AWS added nearly 4 gigawatts of computing capacity, with plans to double this output by the end of 2027, highlighting the growth trajectory of Amazon’s cloud business.
AWS Reports Impressive Growth Amid Challenges
Amazon Web Services exhibited robust performance in the fourth quarter, with revenue surging 24% to hit $35.6 billion, outpacing market expectations.
Jassy characterized this as AWS’s “fastest growth in 13 quarters,” indicating that growth could have been even more pronounced had capacity constraints not been an issue.
The CEO noted that the company is striving to be as efficient as possible in scaling its infrastructure to meet increasing demands.
Despite his confidence, analysts like Mark Mahaney from Evercore ISI questioned how Jassy can assure investors of favorable returns from such monumental spending.
Jassy described the burgeoning AI market as a “barbell,” where one end reflects heavy computing demand from AI labs, while the other showcases enterprises leveraging AI for enhanced productivity and cost efficiency. He believes the “middle” segment—comprising businesses that develop AI applications—could evolve into the largest and most sustainable portion of the market.
However, skepticism remains, with Barclays analyst Ross Sandler cautioning that current spending appears concentrated among a select few AI-native firms. Jassy, on the other hand, argued that the market is poised for a broader expansion as more enterprises begin to implement AI technologies.
The tech sector as a whole saw declines on Thursday prior to Amazon’s earnings report, with the Nasdaq Composite dropping by 1.59%. The S&P 500 also dipped 1.23%, pushing it into negative territory for the year, influenced by a rise in U.S. layoffs and growing concerns about the economic climate.
Amazon’s revelation of a massive capital expenditure plan echoes similar strategies from other tech giants, with Microsoft also experiencing stock price declines following its own spending announcements.
Despite the market turmoil, some analysts argue the selloff may be premature. Dan Ives from Wedbush Securities reassured investors that fears of an “Armageddon scenario” were exaggerated, while others like Stephen Tuckwood from Modern Wealth Management interpreted the stock dip as a sign the market is being judicious rather than overly optimistic.
Adding to the market’s woes, Bitcoin mirrored the trend, momentarily dropping below $61,000—its lowest price since November 2024—though it later recovered to around $65,208.
As Amazon gears up for its aggressive AI spending strategy, the question remains: Will this bold gamble pay off, or is it a step too far for a technology giant already facing mounting scrutiny?
