Amazon's stock experienced a dip despite the company reporting strong holiday sales, driven by investor concerns regarding a significant increase in planned capital expenditure. The e-commerce giant announced a 14% surge in sales for the fourth quarter of 2025, with net sales reaching $213.4 billion, up from $187.8 billion in the previous year. This growth was fueled by robust holiday spending and better-than-expected performance in its cloud computing unit, Amazon Web Services (AWS).
However, the positive sales figures were overshadowed by Amazon's announcement of a nearly 60% increase in capital spending, projecting approximately $200 billion for 2026. This substantial investment is primarily aimed at expanding Amazon's capabilities in artificial intelligence (AI), robotics, semiconductors, and satellites. Wall Street analysts had anticipated a rise in capital expenditure, but the company's forecast of $200 billion far exceeded expectations of around $147 billion.
The market reacted negatively to the news, with Amazon's shares falling. On February 7, 2026, the stock price decreased by 5.55 percent, closing at $210.32. This decline reflects investor apprehension about the potential impact of such a large investment on Amazon's profitability and free cash flow.
Despite the market's worries, Amazon CEO Andy Jassy expressed confidence in the company's long-term prospects, stating that the company anticipates strong returns on the invested capital. Jassy highlighted the rapid monetization of AI capacity, emphasizing the transformative potential of AI across all customer experiences. Amazon's AWS backlog has grown to $244 billion, a 40% year-over-year increase, signaling strong demand for cloud services. AWS's growth accelerated to 24% year-over-year, reaching $35.6 billion in sales, marking its fastest growth rate in 13 quarters.
The increased capital expenditure is expected to bolster Amazon's AI infrastructure and first-party chip development, aiming to improve price-performance and reduce inference costs. Amazon is investing heavily in data centers, servers, and networking equipment to train and deploy sophisticated AI models.
Amazon's financial performance in 2025 showcased its ability to fund AI expansion, with net income rising to $77.7 billion, compared to $59.2 billion in 2024. Operating income also increased to $80 billion, up from $63.8 billion in the previous year.
For the first quarter of 2026, Amazon projects net sales between $173.5 billion and $178.5 billion, representing growth between 11% and 15% compared to the first quarter of 2025. Operating income is expected to range between $16.5 billion and $21.5 billion. This guidance includes increased costs associated with Amazon Leo and investments in quick commerce and international stores.
While the increased capital expenditure has raised concerns among investors, Amazon's management remains optimistic about the company's future growth prospects in the AI era. The company's strong financial performance and the increasing demand for its cloud services provide a solid foundation for its ambitious investment plans.
