Amazon.com (NASDAQ:AMZN) exceeded fourth-quarter revenue expectations on Thursday, but unsettled investors by projecting capital spending of roughly $200 billion in 2026, far above market forecasts. The outlook triggered a sharp selloff, with the stock dropping more than 9% at Friday’s open.
The reaction comes amid a broader rotation on Wall Street away from technology stocks and toward other sectors. Investors have increasingly moved from viewing AI as a tide lifting all tech names to a more selective approach that separates winners from losers. Software stocks have borne the brunt of this reassessment, with weakness spilling over into semiconductors and the wider tech complex.
Concerns around stretched valuations and aggressive spending plans also weighed on sentiment. Amazon’s 2026 capex guidance significantly exceeded the consensus estimate of $146.1 billion, amplifying worries about near-term returns. Still, some analysts remain constructive. Morgan Stanley’s Brian Nowak said Amazon continues to show strong returns on invested capital, citing accelerating growth at AWS and improving efficiency in retail, which he views as supportive of long-term upside.
The guidance followed closely after Alphabet surprised markets with its own sizeable 2026 investment plans, underscoring how Big Tech is leaning heavily into AI infrastructure.
On earnings, Amazon posted Q4 2025 revenue of $213.39 billion, up 13.6% year over year, beating the top-line consensus, while earnings per share came in at $1.95, narrowly missing expectations. For the first quarter of 2026, the company forecast revenue between $173.5 billion and $178.5 billion, broadly in line with estimates.
CEO Andy Jassy said the company plans to invest aggressively across AI, chips, robotics, and low-Earth-orbit satellites, arguing that the scale of opportunity supports strong long-term returns despite near-term spending pressure.
AWS in focus
Amazon Web Services remains central to the company’s AI strategy and is its fastest-growing segment. AWS generated $35.6 billion in Q4 revenue, up 23.6% year over year, supported by rising demand for cloud computing and AI tools such as Bedrock, alongside products like Alexa and Polly. Analysts noted that AWS grew faster than Amazon’s advertising business during the quarter, with improving operating margins.
Amazon has also expanded its AI ecosystem through a significant investment in Anthropic, the developer of the Claude model. The company continues to scale infrastructure rapidly, having added 3.8 gigawatts of cloud capacity over the past year and aiming to double AWS power capacity again by 2027.
UBS analysts said the market may still be underestimating the longer-term payoff from this investment cycle, suggesting that a doubling of AWS revenue by 2028 could drive a meaningful increase in free cash flow.
Despite its ambitions, Amazon’s stock has lagged some of its “Magnificent Seven” peers over the past year. Beyond AI, the company’s core retail and subscription businesses remain its largest revenue drivers, with North America sales reaching $127.1 billion in Q4, up 9.9% year over year. Analysts said improved fulfillment efficiency and growing adoption of Amazon’s AI shopping assistant, Rufus, helped support profitability during the key holiday period, even as consumer confidence softened.
