Amazon.com (NASDAQ:AMZN) delivered a solid quarterly revenue beat on Thursday, but investors focused on its capital spending outlook after the company flagged roughly $200 billion of capital expenditures for 2026—well above market expectations.
The guidance sent shares sharply lower, with the stock sliding 9.3% in premarket trading on Friday.
Amazon’s results arrive amid a broader shift on Wall Street, where investors have been rotating out of technology stocks and into other sectors. The narrative around artificial intelligence has also evolved, moving away from the idea that all tech companies will benefit equally toward a more selective view of winners and losers. Software firms have been singled out as relative laggards, and weakness in that space has spilled over into chipmakers and the wider tech complex.
Concerns about stretched valuations and aggressive investment plans have added to the pressure. Amazon’s $200 billion capex projection significantly exceeded the consensus estimate of $146.11 billion.
“AWS is accelerating with even faster growth ahead and Retail is delivering with improving efficiency. Yes, AMZN is investing (AWS, Retail, LEO), but it has a track record of showing ROIC, which leaves us bullish on this under-appreciated GenAI winner across,” Morgan Stanley equity analyst Brian Nowak said in a note to clients.
Amazon’s guidance followed closely on the heels of a similar surprise from Alphabet (NASDAQ:GOOGL), after Google’s parent outlined potential capital spending of up to $185 billion in 2026.
Looking at the quarter itself, Amazon posted earnings of $1.95 per share on revenue of $213.39 billion for Q4 2025, representing 13.6% year-on-year growth. While revenue beat expectations of $211.27 billion, profit missed forecasts by one cent.
“Amazon delivered a slightly mixed picture with strong overall revenue growth and a standout boost from the cloud unit’s much anticipated reacceleration picking up greater speed,” Emarketer principal analyst Sky Canaves said.
For the current quarter, Amazon guided to Q1 2026 revenue of between $173.50 billion and $178.50 billion, compared with an average analyst estimate of $175.20 billion.
“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,” CEO Andy Jassy said.
Focus on AWS
For the Magnificent 7 heavyweight, Amazon Web Services sits at the heart of its AI strategy and remains the group’s fastest-growing division. AWS generated $35.58 billion in revenue in the fourth quarter, up 23.6% year on year. Beyond cloud infrastructure, the unit hosts Amazon’s AI platforms and tools for building agents and applications, including Bedrock, as well as products such as Alexa and Polly.
“The cloud unit achieved the rare feat of growing faster than the ads business in Q4 with improved operating margins,” Emarketer’s Canaves said.
Amazon has also made a sizable investment in Anthropic, the AI startup behind the Claude large language model.
In October last year, Amazon said it had added 3.8 gigawatts of cloud computing capacity over the prior 12 months—more than any other cloud provider. On the earnings call, Jassy noted that “we’re now double the power capacity that AWS was in 2022, and we’re on track to double again by 2027.”
Ahead of the results, UBS had warned that the market was underestimating the implications of Amazon’s capital spending ambitions.
“Given plans to double capacity by 2027, we have raised our aggregated 4Q25-4Q27 CapEx estimates from $300 billion to $344 billion (AWS $225 billion to $260 billion),” UBS analysts Stephen Ju and Vanessa Fong had said.
“In our view AMZN shares is still a coiled spring as neither us nor the Street are pricing in 2028 AWS revenue as having doubled after the incremental capital intensity. That scenario should result in an incremental ~$20 billion in FCF for 2028,” they said.
Despite its scale, Amazon’s shares have lagged its Magnificent 7 peers. The stock gained 5.2% in 2024, the weakest performance among the group and well below the S&P 500’s 16.4% rise. Performance in 2026 has also been muted, with Amazon up 0.9% year to date, compared with a 0.5% gain for the benchmark index.
While AI dominates headlines, the bulk of Amazon’s revenues still come from its core e-commerce, retail and subscription businesses, including Prime, within its North America segment. That division generated $127.08 billion of revenue in Q4, up 9.9% year on year.
Consumer spending has come under pressure amid mounting economic headwinds. The National Retail Federation expects U.S. holiday sales growth of 4.1% in 2025, down from 4.3% in 2024, while a key measure of consumer confidence recently fell to its lowest level since May 2014.
“The core retail business maintained solid growth through the all-important holiday quarter, with a notable improvement in North America profitability driven by operational leverage in fulfillment despite the expansion of ever-faster delivery. Amazon’s AI shopping assistant Rufus is gaining traction and driving more sales among users,” Emarketer’s Canaves said.