Amazon’s stock took a significant hit, dropping over 10% during extended trading on Thursday after the company released its fourth-quarter earnings report, which revealed mixed results alongside an increase in its full-year spending forecast to a staggering $200 billion.
The earnings report brought mixed news: Amazon reported earnings per share of $1.95, slightly missing the analyst estimate of $1.97. In terms of revenue, the company posted $213.39 billion, surpassing expectations of $211.33 billion. Investors were particularly focused on several key segments, including the performance of Amazon Web Services (AWS) and advertising revenue. AWS revenue came in at $35.58 billion, exceeding the anticipated $34.93 billion, while advertising revenue reached $21.32 billion, marginally surpassing the $21.16 billion prediction.
Looking ahead, Amazon signaled that it plans to significantly increase its capital expenditures, driven by an aggressive investment strategy focused on infrastructure to support a growing demand for artificial intelligence services. The company’s projected capex for this year is a monumental $200 billion, which starkly contrasts the analyst expectation of $146.6 billion, as reported by FactSet.
CEO Andy Jassy noted, “With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, 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.” This ambitious spending reflects a broader trend in the tech industry, with major companies making substantial commitments to AI technologies. Google parent company Alphabet recently indicated plans to allocate between $175 billion and $185 billion by 2026, while Meta is projecting its capital expenditures will nearly double to between $115 billion and $135 billion.
In a promising light, despite the immediate downturn in stock value, Amazon’s growth in cloud computing revenue, which grew by 24% in the fourth quarter, demonstrates its ability to surpass expectations and adapt to market demands.
This ongoing investment in technology positions Amazon well for the future, potentially leading to long-term benefits as the demand for AI and related services continues to expand significantly. As the tech landscape evolves, it will be interesting to monitor how these strategic decisions impact Amazon’s trajectory and its response to competitive pressures in the industry.