Amazon warned on Thursday that its capital spending will jump by more than 50% this year, underscoring an industry-wide race to scale artificial-intelligence infrastructure and triggering a sharp sell-off in its shares. The stock slid 11.5% in after-hours trading after the company said it plans to pour roughly $200 billion into AI-related investments in 2026.
During the earnings call, Amazon CEO Andy Jassy adopted a defensive tone as investors questioned the scale of the spending. He contrasted Amazon’s cloud performance with rivals, noting that Amazon Web Services’ growth is coming off a much larger base. AWS posted 24% year-on-year growth on an annualized revenue run rate of $142 billion, compared with Google Cloud’s 48% rise to $17.75 billion and Microsoft Azure’s 39% increase over the same period.
AWS revenue climbed to $35.6 billion in the December quarter, marking its fastest growth in more than three years. Even so, concerns over the cost of the AI build-out weighed heavily on sentiment. Amazon shares had already fallen 4.4% in regular trading as investors grew uneasy about the rising bill for artificial-intelligence expansion.
The results reinforced expectations that Big Tech will continue spending aggressively on AI. Collectively, Amazon, Microsoft, Google and Meta are projected to invest more than $630 billion this year, putting pressure on companies to demonstrate clear financial returns from those outlays.
Amazon also forecast first-quarter operating income of between $16.5 billion and $21.5 billion, below market expectations. The outlook includes about $1 billion in additional costs, partly tied to its high-speed satellite internet project, Leo. Analysts surveyed by LSEG had penciled in operating profit of $22.04 billion.
Market reaction suggests investors remain wary of rising capital expenditure without immediate payoff. While Alphabet and Meta were largely applauded for their spending plans due to strong cloud momentum, Microsoft’s shares were hit last week after only narrowly beating growth estimates. Analysts noted that Amazon’s projected 2026 capex will exceed its operating cash flow, highlighting the scale of the commitment required to stay competitive.
Despite the spending concerns, AWS remains the core profit engine for Amazon. Although it contributes just 15% to 20% of total revenue, it generates more than 60% of operating profit. Jassy used much of the earnings call to highlight new AWS launches, including hundreds of upcoming applications, AI-powered customer service tools and live sports alert features.
Beyond cloud, Amazon continues to invest in its retail operations, expanding delivery coverage in rural areas, strengthening same-day and next-day logistics, and pushing further into groceries. At the same time, the company booked $610 million in asset impairments tied mainly to its physical stores business, as it winds down Amazon Go and Amazon Fresh locations and converts select sites into Whole Foods outlets.
Advertising remained a bright spot, with fourth-quarter sales rising 22% to $21.3 billion. Jassy said new AI tools on Prime Video now allow advertisers to create campaigns with minimal human input.
Amazon also continued restructuring its workforce. The company cut 14,000 corporate roles during the quarter and a further 16,000 earlier this year, citing efficiency gains from AI and cultural changes. Even so, total headcount ended the year 21,000 higher than in the same period of 2024.
