Amazon’s fourth-quarter numbers arrived with a split personality: revenue and cloud growth beat expectations, but a sky‑high capital‑spending plan and a slight earnings miss sent the stock sharply lower.
Investors punished the company after hours — shares slid about 10% — when Amazon said it expects roughly $200 billion in capital expenditures in 2026, far above analyst forecasts. The market view was simple: explosive spending promises today can mean weaker returns for shareholders tomorrow, even when the business itself looks healthy.
Why the market recoiled
The immediate catalyst was the company’s capex projection. Amazon told investors it would pour roughly $200 billion into infrastructure next year as it races to add data center capacity, build chips and robotics, and pursue longer‑term bets such as low‑Earth‑orbit satellites. Analysts had expected roughly $146.6 billion, and Amazon’s own capex in 2025 was about $131 billion.
CEO Andy Jassy framed the buildout as a response to surging demand for AI and core cloud workloads. On the investor call he said the spending would be “predominantly” for AWS, where customers are shifting heavy AI workloads into the cloud. That logic tracks: cloud compute and specialized infrastructure are capital‑intensive, and vendors are fighting to avoid being capacity‑constrained as generative AI becomes mainstream.
If you want a regional snapshot of the arms race, look at what other big cloud players have signaled. Alphabet recently outlined a similarly vast spend plan for 2026, and Meta has signposted a dramatic increase in its own infrastructure budget. Amazon’s move sits squarely in that competitive landscape — and helps explain the market’s short‑term anxiety.
The numbers under the headlines
Amazon reported Q4 revenue of about $213.4 billion, beating consensus estimates. Net income rose to $21.19 billion, and earnings per share came in at $1.95 — just shy of the $1.97 analysts expected. Those decimals mattered: investors focused on the EPS miss and the capex surprise rather than the topline beat.
AWS was the standout. The unit generated roughly $35.6 billion in revenue, a 24% year‑over‑year increase — its fastest quarterly growth in more than three years and a significant driver of overall results. AWS now represents roughly 16.6% of Amazon’s consolidated revenue run rate, and operating income at the unit rose noticeably year over year. Advertising also continued to grow, delivering more than $21 billion in revenue for the quarter.
Still, stronger cloud growth didn’t soothe traders. Big, up‑front investments in data centers and silicon mean longer paths to profit expansion — a reality that markets often punish in the short term.
Bigger picture: capacity, competition and timing
Amazon’s capex plan is a bet on volume and future returns: more servers, more custom chips, more specialized racks for AI. The company has already built dedicated facilities such as the Project Rainier AI data center and says it’s adding gigawatts of power to its global footprint. Jassy argues the investments will yield “strong long‑term return on invested capital.”
But there’s a risk‑return equation. Large, immediate outlays raise the bar for future growth and margin expansion, and they expose Amazon to execution timing — when the capacity is ready, how quickly customers consume it, and whether pricing and utilization match projections.
This moment also underscores how cloud providers are diversifying where and how they build infrastructure. Amazon’s interest in space‑based and novel architectures sits alongside other industry efforts; for instance, Google has explored putting data centers in orbit with Project Suncatcher. Meanwhile, rivals are sharpening their AI stacks: Microsoft’s move into custom models and tooling, such as MAI‑Image‑1, illustrates the kinds of services that drive demand for massive compute pools.
People and posture
The company is also navigating a workforce reset: Amazon said it would cut roughly 16,000 corporate roles in a recent round of layoffs, months after other reductions. Headcount decisions lower operating cost structurally, even as capex rises — a dual strategy that makes the company leaner on payroll while beefing up capital assets.
For customers and enterprise partners, the message is straightforward: Amazon intends to own massive slices of the infrastructure stack as AI workloads scale. For investors, the message is more mixed — strong growth, but a heavier near‑term spending profile that tested patience.
Whether the market’s reaction proves temporary will depend on execution. If AWS capacity comes online smoothly and customers absorb it at projected rates, the $200 billion will look prescient. If not, Amazon will face the familiar challenge of reconciling big ambitions with the rhythms of profitability and investor expectations.