Amazon shares plunged 9.21% on February 6, closing near $205 — the worst post-earnings reaction since April 2022. The culprit? A jaw-dropping $200 billion capital expenditure plan for 2026, exceeding Wall Street expectations by more than $50 billion.
Revenue Beat, But Profit Outlook Stings
On paper, Amazon delivered a solid quarter: Q4 revenue hit $213.4 billion, up 14% YoY, beating the $211.4 billion consensus. AWS cloud revenue surged 24% YoY to $35.6 billion, the fastest growth in 13 quarters. Advertising also impressed at $21.3 billion, up 22%. However, EPS of $1.95 slightly missed estimates of $1.96-$1.97.
The real bomb was the Q1 2026 operating income forecast: a midpoint of $19 billion, far below analyst expectations of $22-$26 billion. Markets read it clearly: massive spending is eating into near-term profitability.
History's Most Aggressive AI Bet
Amazon's 2026 capex of $200 billion marks a 50% jump from 2025's ~$130 billion, per Business Insider. Wall Street had penciled in $146.6 billion. The extra $50 billion+ left investors stunned.
Where's the money going? AI data centers, proprietary Trainium and Graviton chips, robotics automation, and Project Kuiper satellite internet — all capital-intensive endeavors. Free cash flow in 2025 shrank 70% to just $11.2 billion. At the planned $200 billion spend, outlays could exceed operating cash flow itself.
Goldman Sachs kept a $300 price target but warned of near-term pressure, citing retail profit headwinds. Evercore ISI analyst Mark Mahaney questioned the visibility of long-term returns.
CEO's Gamble: Once-in-a-Generation Opportunity or Overreach?
CEO Andy Jassy defended the strategy on the earnings call: AI is an "extraordinarily rare opportunity." Amazon isn't alone — Google plans $175-$185 billion, Meta and Microsoft are also ramping up, pushing Big Tech's combined AI capex past $600 billion.
The crucial question: when will these bets translate into EPS growth? Of 36 analysts covering Amazon, all maintain a "Strong Buy," with an average target of $298.53 (34% upside). But the stock's reaction shows that long-term conviction and short-term holding pain are different beasts.