TLDR
- Amazon shares tumbled 9% on February 6 after the company unveiled plans to invest $200 billion in capital expenditures during 2026.
- Fourth-quarter earnings per share of $1.95 missed the $1.96 analyst estimate while revenue of $213.4 billion beat forecasts by $2.17 billion.
- AWS revenue growth reached 24%, outperforming the 22% Wall Street prediction, with backlog expansion outpacing revenue growth by 40%.
- Multiple analysts trimmed price targets to $275 from higher levels but maintained bullish ratings on the stock.
- The spending plan represents a 50% jump from 2025 levels and came in $50 billion above Wall Street expectations.
Amazon delivered fourth-quarter results on February 5 that triggered a sharp decline in its stock price. Shares fell approximately 9% the next day as the company’s spending forecast rattled investors.
The e-commerce giant posted earnings per share of $1.95, missing the Street’s $1.96 estimate. Revenue came in stronger at $213.4 billion, climbing 13.6% year-over-year and surpassing expectations by $2.17 billion.
AWS showed continued strength with revenue growth hitting 24%. The figure beat analyst forecasts of 22% and marked sequential acceleration in the cloud division.
Record Infrastructure Investment Sparks Selloff
CEO Andy Jassy revealed Amazon will deploy approximately $200 billion in capital expenditures through 2026. The number represents more than a 50% increase from the nearly $130 billion spent during 2025.
Analysts had penciled in roughly $150 billion for the year. The actual guidance exceeded those estimates by $50 billion.
The company ended 2025 holding $90.1 billion in cash and cash equivalents. Net income for the full year totaled $77.7 billion, up 31% from the prior period. Amazon carries $68.8 billion in long-term debt on its balance sheet.
Reaching the $200 billion spending target will likely require the company to raise additional debt. The majority of funds will go toward AWS infrastructure buildout and custom AI chip production.
Amazon projected first-quarter revenue of $173.5 billion to $178.5 billion. The midpoint beat consensus but margin guidance came in below expectations.
Price Target Adjustments Follow Earnings
Bank of America analyst Justin Post cut his price target to $275 from $286 while keeping a Buy rating. The revision accounts for margin uncertainty and compression in software sector valuations.
Post’s updated target still suggests roughly 31% upside potential. His valuation framework prices AWS at 8 times estimated 2027 sales.
The analyst defended the spending ramp. He noted Amazon faces stiff competition from Microsoft and Google in cloud infrastructure and AI services.
Management views AI as a rare growth opportunity. The company expects customers will shift more computing workloads to the cloud to leverage AI capabilities.
Amazon launched Project Rainier in October 2025, a computing cluster powered by 500,000 Trainium2 chips. Anthropic trains its AI models using the infrastructure. Jassy said chip counts will continue climbing.
Total customer backlog reached $244 billion. While Jassy didn’t provide customer-specific details, a substantial portion likely stems from Anthropic and OpenAI agreements.
Both AI firms have yet to achieve profitability. If either encounters financial difficulties, Amazon could struggle to utilize capacity built specifically for them.
The company began shipping Trainium3 chips in December 2025. The new processors provide 40% improved price-performance compared to Trainium2. Jassy expects near-complete Trainium3 allocation by mid-2026, with Trainium4 already in the works.
Scotiabank also trimmed its target to $275 from $300 while keeping a Sector Outperform rating. The firm cited weak operating income and poor international margin performance.
Analyst sentiment remains predominantly positive across Wall Street. Out of 43 analysts covering Amazon, 38 rate it a Buy while 5 maintain Hold recommendations. The consensus price target stands at $283.43, implying 35% upside over the next 12 months.
