Amazon’s $200 Billion AI Infrastructure Bet Sparks Wall Street Jitters Amid Record Earnings
Amazon.com Inc. unveiled plans to invest approximately $200 billion in capital expenditures during its fiscal year 2026, primarily targeting artificial intelligence infrastructure through its Amazon Web Services (AWS) division, sending its stock tumbling in after-hours trading.[2][3]
The announcement came during the company’s fourth-quarter 2025 earnings call on Thursday, where CEO Andy Jassy defended the massive outlay as essential to meet surging demand for AI workloads. “Customers really want AWS for core and AI workloads,” Jassy stated. “We’re monetizing capacity as fast as we can install it.”[3]
Robust Q4 Results Offset by Spending Shock
Amazon reported strong financial performance for the quarter ending December 31, 2025. Net sales rose 14% year-over-year to $213.4 billion, while AWS revenue surged 24% to $35.6 billion, marking the cloud unit’s fastest growth in more than three years.[2][4]
For the full fiscal year 2025, total net sales reached $716.9 billion, up 12% from the prior year. However, free cash flow over the trailing 12 months dipped to $11.2 billion, reflecting stepped-up investments in property and equipment tied to AI.[2][3]
Despite the positive revenue figures, the capex forecast stunned investors. Shares plunged more than 9% at the open and closed down 5.6% at $210.32 in late Friday trading.[2] Analysts noted the figure exceeded Wall Street expectations by over $50 billion, raising questions about the pace of returns on these long-term bets in data centers, servers, chips, robotics, and low Earth orbit satellites.[1][3][6]
Wall Street Questions ROI Amid AI Arms Race
RBC Capital Markets and others expressed skepticism, pointing to AWS’s Q4 revenue beat of just $1 billion as insufficient justification for the scale of spending, even with a $244 billion backlog.[1] MoffettNathanson described the magnitude as “materially greater than consensus expected,” evoking comparisons to the dot-com era.[2]
“The strong long-term return on invested capital — I think that’s the debate in the market today,” said Mark Mahaney of Evercore ISI during the earnings call.[6]
Jassy pushed back, emphasizing AWS’s ability to forecast demand and deploy capacity efficiently. He highlighted in-house chips like Trainium and Graviton, projected to generate over $10 billion in revenue this year, and a successful partnership with Anthropic.[4][6] “This isn’t some sort of quixotic top-line grab,” Jassy assured. “We have confidence that these investments will yield strong returns on invested capital.”[6]
The spending aligns with a broader Big Tech push. Amazon, Google, and Microsoft together plan over $500 billion in 2026 capex, with Alphabet eyeing up to $185 billion and Microsoft on pace to double its outlays.[3] Investors are scrutinizing whether the AI buildout will deliver payoffs quickly enough amid rising costs that dent cash flows before boosting sales.[2]
AWS Acceleration Signals AI Momentum
Analysts like Futurum Group’s Daniel Newman noted that perceptions of AWS lagging in AI have dissipated. “The narrative that AWS was slow off the blocks on AI has faded,” Newman said.[3]
Mizuho’s Lloyd Walmsley echoed this on BNN Bloomberg, praising a 4 percentage point acceleration in AWS growth and 16-point backlog surge, positioning Amazon strongly in AI-driven cloud demand.[5]
| Metric | Value | YoY Change |
|---|---|---|
| Net Sales | $213.4 billion | +14% |
| AWS Revenue | $35.6 billion | +24% |
| Full-Year Sales | $716.9 billion | +12% |
| Trailing 12-Month Free Cash Flow | $11.2 billion | Decline |
Market Eyes Upcoming Catalysts
Attention now turns to macroeconomic indicators like U.S. January CPI data on February 13 and Nvidia’s quarterly results on February 25, which could influence sentiment around AI investments.[2]
While the capex plan rattled short-term traders, proponents argue it positions Amazon at the forefront of an AI revolution reshaping cloud computing. Jassy described it as an “extraordinarily unusual opportunity” to scale AWS dramatically.[6]
The market’s reaction underscores a pivotal tension: balancing aggressive infrastructure bets against immediate profitability pressures in the hottest tech race since the internet boom.