Amazon’s $200 Billion Bet Sends Shares Reeling

Despite posting record revenues and its strongest cloud growth in three years, Amazon shares faced significant selling pressure following its latest quarterly report. While core operations showed strength, a staggering capital expenditure announcement for 2026 has unsettled investors, casting doubt on near-term cash flow prospects.

The primary catalyst for the stock's decline was a new spending target unveiled by the company. CEO Andy Jassy announced capital expenditure plans for 2026 approaching $200 billion. This figure came as a shock to the market, landing a full 36% above the average analyst estimate of approximately $147 billion.

This represents an increase of roughly 53% compared to the prior year. Jassy defended this aggressive investment strategy, citing intense demand for existing services alongside what he termed "groundbreaking opportunities" in artificial intelligence, custom chips, robotics, and satellite internet.

Free Cash Flow Plummets

The costly strategic shift is already making a marked impact on the balance sheet. On a trailing twelve-month basis, Free Cash Flow collapsed by 71% to $11.19 billion. Even as operating cash flow increased, the market is concerned that massive infrastructure outlays could pressure profitability for an extended period.

Should investors sell immediately? Or is it worth buying Amazon?

Strong Performance in Core Segments

This investor anxiety overshadowed robust fourth-quarter 2025 results from Amazon's main business divisions. The cloud unit, AWS, saw revenue expand by 24% to $35.58 billion, surpassing Wall Street's expectations. Jassy noted this was the division's fastest growth rate in 13 quarters. The advertising business also demonstrated resilience, with segment revenue climbing 23% to $21.32 billion.

Total corporate revenue reached $213.39 billion, also exceeding forecasts. The sole miss came on earnings per share, which at $1.95 narrowly fell short of the anticipated $1.97. This was attributed to several one-time items, including severance payments, write-downs on physical stores, and a tax payment in Italy.

The AI Infrastructure Gamble

Management frames the elevated spending as a necessary wager on future growth. The company highlighted particular momentum in its custom silicon business, where its Trainium and Graviton chip models have now achieved an annual revenue run rate exceeding $10 billion. Amazon also pointed to its substantial AWS backlog, which has grown to $244 billion.

For the current first quarter of 2026, Amazon provided revenue guidance in the range of $173.5 to $178.5 billion. In the months ahead, shareholders will be watching closely to see if the enormous capital flowing into data center infrastructure can generate measurable returns quickly enough to justify the dramatic contraction in free cash.