The sharp sell-off came despite the Seattle-based company reporting strong fourth-quarter results, with revenue climbing 14% to $213.4 billion and its flagship cloud unit Amazon Web Services posting its fastest growth in 13 quarters at 24%.
Wall Street analysts had expected capital expenditures of around $147 billion for 2026, according to FactSet, making Amazon’s $200 billion projection a jarring surprise that raised fresh questions about whether AI investments will deliver commensurate returns.
“The market just dislikes the substantial amount of money that keeps getting put into capex for these growth rates,” said Dave Wagner, portfolio manager at Aptus Capital Advisors.
CEO Andy Jassy struck a notably defensive tone during the investor call, contrasting sharply with the more confident executives at Alphabet, which announced its own massive spending plans on Wednesday. “As a reminder, it’s very different having 24% year-over-year growth on a $142 billion annualized run rate, than to have a higher-percentage growth on a meaningfully smaller base, which is the case with our competitors,” Jassy said.
The comparison highlighted Amazon’s challenge: AWS generated $35.6 billion in the December quarter, while Google Cloud surged 48% to $17.75 billion and Microsoft’s Azure jumped 39% in the same period.
Despite the growth gap, Jassy insisted the investments would pay off. “We are continuing to see as fast as we install this capacity, this AI capacity, we are monetizing it,” he said on the earnings call. “So it’s just a very unusual opportunity. I passionately believe that every customer experience that we know of today is going to be reinvented.”D.A. Davidson analyst Gil Luria was blunt about the competitive pressure: “Amazon has to invest at these levels just to stay in the race.”
Amazon’s projected 2026 spending will exceed its operating cash flow, noted Asit Sharma, senior investment analyst at The Motley Fool, underscoring the financial strain of keeping pace with rivals in the AI arms race.
The top four hyperscalers—Amazon, Microsoft, Google and Meta—are expected to collectively spend more than $630 billion this year on AI infrastructure, according to Reuters. Tech earnings over recent days have delivered a clear message from Wall Street: soaring AI spending can continue only if companies show commensurate operational or financial returns.
Amazon also forecast first-quarter operating income between $16.5 billion and $21.5 billion, below the $22.04 billion analysts estimated, according to LSEG. The guidance includes roughly $1 billion in costs related partly to its high-speed satellite internet business, Leo.
The company’s fourth-quarter net income reached $21.2 billion, or $1.95 per share, slightly below the $1.97 analysts expected, compared with $20 billion, or $1.86 per share, in the year-ago quarter.
AWS, though contributing just 15% to 20% of overall sales, generates over 60% of Amazon’s operating profit, making its performance critical to investor confidence. The unit’s fourth-quarter sales growth of 24% was its strongest in 13 quarters but was overshadowed by the capex announcement.
Jassy spent much of the nearly hour-long post-earnings call highlighting AWS’s competitive positioning, noting the platform has launched or will soon launch more than 1,000 new applications, along with a competitive AI-based customer service bot and live sports alerts. “We are being incredibly scrappy,” Jassy said. “In every one of our businesses, you see a very broad use of AI to improve the customer experience, and, in many cases, just to completely reinvent what was possible before.”
Beyond cloud computing, Amazon continues investing heavily in its e-commerce operations. Product sales during the holiday period rose 9.4%, and the company is expanding same-day grocery delivery to more than 2,300 U.S. cities and towns. Its new ultra-fast Amazon Now service, offering delivery in 30 minutes or less, is available in cities across India, Mexico and the United Arab Emirates and is being tested in several U.S. and U.K. communities.
Amazon’s advertising business remained a bright spot, with sales jumping 22% to $21.3 billion in the fourth quarter. Jassy said the company has added AI options to Prime Video, enabling marketers to create ads with limited human interaction.
The results come amid significant workforce reductions. Amazon laid off 14,000 corporate employees in the fourth quarter and another 16,000 earlier this year—totaling over 30,000 cuts since Jassy signaled AI-driven organizational changes. The company said in an emailed statement that AI was “not the reason behind the vast majority of these reductions,” attributing the cuts instead to eliminating management layers to drive speed.
Amazon also took $610 million in asset impairments related primarily to its physical stores unit and announced it would close almost all Amazon Go and Amazon Fresh locations, cutting about 5,000 retail workers. Some shuttered stores will be converted into Whole Foods locations as Amazon retreats from its grocery store experiment. The company’s latest retail bet includes expanding Whole Foods’ footprint and opening a 225,000-square-foot mega-store to compete with Walmart and Costco.
Despite the layoffs, Amazon finished the year with 21,000 more employees than the same period in 2024.
For the current quarter, Amazon expects sales between $173.5 billion and $178.5 billion, compared with analyst projections of $175.6 billion.
Amazon shares closed down 4.4% during regular trading Thursday as worries deepened about the enormous cost of the AI boom across Big Tech, before the after-hours plunge on the spending announcement.