Amazon Stock Drops After $200 Billion Spending Plan Revealed

Amazon, the world’s largest online retailer and cloud computing powerhouse, delivered its fourth-quarter earnings report on February 5, 2026—and the numbers, while impressive in many respects, triggered a sharp drop in the company’s stock price. The reason? Investors balked at Amazon’s eye-popping capital expenditure forecast for the year ahead, raising questions about the risks and rewards of the company’s aggressive push into artificial intelligence, custom chips, robotics, and satellite technology.

According to the company’s report, Amazon’s net sales for the fourth quarter reached $213.39 billion, surpassing Wall Street’s estimate of $211.49 billion, as noted by Bloomberg Consensus. The company’s Amazon Web Services (AWS) cloud unit, a crucial driver of Amazon’s profitability, grew 24% year-over-year to $35.58 billion, beating the 21% growth estimate. However, earnings per share came in at $1.95, just shy of the anticipated $1.96.

The headline-grabbing figure, though, was CEO Andy Jassy’s announcement that Amazon plans to spend about $200 billion in capital expenditures in 2026. That’s not just a step up—it’s a leap, far above the analyst consensus of $146.11 billion and well ahead of the capex plans announced by rivals like Meta, Microsoft, and Google’s parent company Alphabet. Jassy was unapologetic about the scale of the investment. “We’re going to invest aggressively here. And we’re going to invest to be the leader in this space,” he declared on the company’s earnings call, as reported by Business Insider.

Jassy emphasized that most of the spending would be focused on AWS, where demand for cloud and AI services remains sky-high. “We just have a lot of growth, a lot of demand,” he said, noting that AWS added 3.9 gigawatts of computing power over the past year—twice what it had in 2022—and plans to double that capacity again by the end of 2027. This surge in infrastructure is meant to position Amazon as the go-to provider for AI-native cloud services, outpacing competitors in a supply-constrained environment for compute power. Bernstein analysts observed, “We are in a supply-constrained environment for AI compute and AWS are world-class at bringing more compute capacity online.”

Yet, for all the optimism about the future, the market’s reaction was swift and negative. Amazon shares plummeted by as much as 10% in after-hours trading following the earnings release, after already sliding 5% during the regular session. The drop reflected investor anxiety over whether Amazon’s huge spending spree will generate the returns needed to justify it—especially at a moment when consumer spending is showing signs of cooling, putting pressure on the company’s retail business.

Amazon’s operating income for the quarter was also dented by significant one-time costs: $730 million in severance related to layoffs, $610 million in asset impairments on its physical stores, and a $1.1 billion payment to resolve a tax dispute in Italy. Despite these headwinds, Amazon’s retail business and advertising division both grew during the holiday shopping season. Advertising revenue, in particular, jumped 23% year-over-year to $21.3 billion, buoyed by expanded ad tech and new media partnerships with Netflix and Disney, as highlighted by EMARKETER analyst Sky Canaves.

Amazon’s custom chip business emerged as another bright spot. The company’s Trainium and Graviton chips, designed to reduce costs and reliance on Nvidia’s GPUs for AI training, now boast an annual revenue run rate of over $10 billion and are “growing triple digits,” according to Zacks Investment Research strategist Ethan Feller. Jassy underscored the importance of these chips: “It’s early days with what’s possible here,” he said, adding that the upcoming Trainium 3 chip supply is expected to be committed by mid-year.

In the world of fulfillment, Amazon continues to push the boundaries of speed and automation. The company now has over 1 million robots in its fulfillment network, a move Jassy said brings significant cost efficiencies. Prime members received 8 billion items with same-day or next-day shipping in 2025, a 30% increase over the previous year, with half of those items being groceries and everyday essentials. CFO Brian Olsavsky noted that the company will keep optimizing inventory and launching new robotics and automation to further boost efficiency.

Amazon’s retail strategy is also evolving. The company recently announced the closure of about 60 Amazon Fresh stores and 15 Amazon Go convenience stores, pivoting instead to expand its Whole Foods footprint and double down on grocery delivery. Jassy said Amazon aims to compete with rivals by “staying sharp on price,” and that Amazon Fresh had targeted the middle-market grocery segment before its closure.

Artificial intelligence remains at the heart of Amazon’s vision for the future. The company’s AI shopping assistant, Rufus, was used by 300 million customers in 2025 and made users 60% more likely to complete a purchase. Yet Jassy acknowledged there’s room for improvement: “We have to collectively figure out a better customer experience,” he admitted, pointing out that many AI agents still struggle with understanding shopping history and product details.

Amazon’s partnership with OpenAI, announced in November 2025, is expected to play a key role in advancing its AI capabilities. “We have a lot of respect for OpenAI, and we want to continue to extend our partnership over time,” Jassy said, while also asserting that the AI movement “is not going to be a couple companies. It’s going to be thousands of companies over time.”

Looking ahead, Amazon’s guidance for the first quarter of 2026 projects net sales between $173.5 billion and $178.5 billion, in line with Wall Street expectations. Still, analysts remain divided on the company’s near-term prospects. Thomas Monteiro of Investing.com remarked, “For Amazon, this quarter makes clear that AI scale is no longer about ambition—it’s about balance-sheet endurance.” Deutsche Bank analysts, meanwhile, believe Amazon could be a top performer in 2026, thanks to e-commerce demand and AWS-driven growth.

As Amazon doubles down on infrastructure, chips, and AI, the stakes couldn’t be higher. The company is betting that today’s massive investments will secure its dominance in the next era of technology, even as shareholders weigh the risks. For now, the world will be watching to see if Amazon’s bold vision pays off—or if the costs prove too steep.