Amazon on Thursday predicted a more than 50% jump in capital spending this year, joining peers in ramping up spending to build artificial intelligence infrastructure, sending its shares down 11.5% in after-hours trading. As stock prices jumped on news that Amazon would spend $200 billion to boost its AI efforts in 2026, CEO Andy Jassy was defensive on a conference call with the company’s investors, in contrast to Alphabet executives who were more confident Wednesday after Google showed resilience in developing AI software.
“Just to be clear, there’s a big difference between achieving 24% year-over-year growth at an annualized run rate of $142 billion and achieving higher growth rates on a meaningfully smaller basis, as is the case with our competitors,” Jassy said, referring to the performance of cloud platform Amazon Web Services.
AWS revenue rose to $35.6 billion in the December quarter, while Google Cloud’s revenue rose 48% to $17.75 billion. Microsoft’s Azure soared 39% in the same period.
Amazon’s performance is the latest sign that big tech companies won’t be slowing down their big AI investments anytime soon. Amazon shares closed 4.4% lower during regular trading as concerns deepened over the huge costs of the artificial intelligence boom.
The top four hyperscalers, Amazon, Microsoft, Google, and Meta, are expected to collectively spend more than $630 billion this year.
Tech companies’ earnings over the past few days show that Wall Street is sending a clear message to tech companies. The idea is that the surge in AI spending can only continue if companies show commensurate operating or financial returns.
Amazon also expects first-quarter operating profit to be between $16.5 billion and $21.5 billion, with about $1 billion related in part to higher costs at its high-speed satellite internet business, Leo. Analysts estimate profit at $22.04 billion, according to LSEG.
“The market just doesn’t want to see a lot of money continue to go into capital spending at these growth rates,” said Dave Wagner, portfolio manager at Aptus Capital Advisors. Analysts largely praised Google’s impressive capital spending forecasts, as the company posted impressive growth in cloud revenue (even though the stock fell 3% on Thursday), as did Meta’s capital spending plans. But investors slammed Microsoft’s stock last week after the company’s cloud division grew slightly faster than expected.
Asit Sharma, senior investment analyst at The Motley Fool, said Amazon’s expected large spending in 2026 will exceed operating cash flow. “Amazon needs to invest at this level to stay competitive,” said Gil Luria, an analyst at DA Davidson.
Although Amazon is small, accounting for only 15% to 20% of overall sales, Amazon Web Services generates more than 60% of the company’s operating profits. The 24% sales growth rate in the fourth quarter was the largest in 13 quarters, but was overshadowed by the company’s sharp increase in capital spending.
Jassy spent much of the nearly hour-long post-earnings conference call boasting about AWS’ new products. He pointed out, for example, that AWS has more than 1,000 new applications released or soon to be released, as well as competitive AI-based customer service bots and live sports alerts.
“We’re incredibly rowdy,” Jassy said. “AI is used very extensively across all of our businesses to improve the customer experience, and in many cases to completely reinvent what was possible before.”
Amazon is also investing in its e-commerce business, seeking to reach more customers by expanding into rural areas of the United States, increasing its same-day and next-day delivery capabilities, and expanding into fresh food.
However, Amazon recorded a $610 million asset impairment charge primarily related to its brick-and-mortar division, which includes Amazon Go and Amazon Fresh grocery stores. The company is exiting brick-and-mortar stores by closing all Fresh and Go stores and converting some to Whole Foods stores.
Its latest bet is a 225,000-square-foot megastore aimed at expanding Whole Foods’ store footprint and competing with the likes of Walmart and Costco.
Amazon’s advertising business continues to attract attention. Fourth-quarter sales rose 22% to $21.3 billion, and Jassy said the company added AI options to Prime Video to help marketers create ads with limited human interaction. The Seattle-based company laid off 14,000 employees in the quarter and another 16,000 earlier this year, which the company said was necessary due to efficiencies gained through the use of AI and a desire to change its culture. Still, the company ended the year with 21,000 more employees than the same period in 2024.
(Reporting by Deborah Sofia in Bengaluru and Greg Bensinger in San Francisco; Additional reporting by Arianna McLimore in New York; Editing by Pooja Desai, Sayantani Ghosh and Matthew Lewis)
