Amazon Shares Drop 10% After Earnings Miss and $200B Spending Plan

Amazon's stock fell as much as 10% in after-hours trading on Thursday after the company released its fourth-quarter earnings, which missed Wall Street targets, and forecast capital spending of about $200 billion for 2026. The spending plan, aimed largely at artificial intelligence projects and data centers, came in well above what analysts had expected at $146.6 billion, sparking a sharp sell-off among investors concerned about the hit to profits.

Background

Amazon has been pouring money into AI and cloud computing for several years now. Its Amazon Web Services division, or AWS, leads the market in cloud services, and the company sees AI as the next big growth area. Over the past year, shares had climbed steadily, hitting highs near $259 in the 52-week range, as investors bet on strong holiday sales and AWS demand. But leading into the earnings report on February 5, 2026, the stock had already dipped about 2% over the prior week, closing around $239, as traders pulled back ahead of the news.

The fourth quarter covers the busy holiday shopping period, when Amazon typically posts its strongest results. This time, revenue came in above estimates, but profits took a beating from one-time costs. Operating income dropped due to $730 million in severance payments from layoffs, $610 million in write-downs on its physical stores, and $1.1 billion to settle a tax issue in Italy. These hits overshadowed gains in online sales and advertising.

AWS grew, signing big multi-year deals with companies needing cloud power for their own AI work. Advertising revenue also rose, helped by more sellers on the platform. But the big worry came from the future spending outlook. Amazon plans to build more data centers to handle surging demand for AI tools, at a time when power grid delays in Europe are already slowing some projects.

Key Details

The earnings report showed revenue for the quarter beat expectations on the top line, driven by record deliveries of Prime items at fast speeds. Amazon said it shipped 30% more same-day or next-day packages in 2025 compared to before. Online stores and third-party sellers performed well during the holidays.

Earnings Breakdown

• Revenue: Beat analyst forecasts, though exact figures highlighted steady e-commerce growth.
• Operating Income: Fell short due to the special costs mentioned earlier.
• AWS Growth: Continued to win enterprise contracts, with demand for AI workloads pushing capacity needs higher.

But the capex forecast stole the show. At $200 billion for 2026, it doubles down on investments in servers, chips, and infrastructure. Analysts had penciled in $146.6 billion, so the jump caught markets off guard. Shares dropped nearly 5% during regular trading and another 7% after hours, pushing the price as low as $232 in recent sessions.

Options traders had priced in an 8% swing post-earnings, and the move hit that mark. Broader market rotation away from tech stocks added pressure, as money flowed into other sectors amid high valuations.

"The heavy capex spend reflects our commitment to leading in AI, but we understand investor concerns about the short-term impact on margins," said CFO Brian Olsavsky during the earnings call.

Layoffs continue too, with another 2,200 jobs cut in Seattle recently, part of ongoing restructuring to streamline operations.

What This Means

For Amazon, the spending ramp-up signals confidence in AI as a long-term driver. AWS could capture more market share as businesses rush to build AI models, and tools like the new Alexa+ assistant, now available to all U.S. users, might boost device sales and subscriptions. Talks to invest in OpenAI could bring advanced models into Alexa and AWS, creating new revenue streams.

But near-term, profits face headwinds. High spending on data centers, combined with grid delays in Europe, might delay some growth. Margins could stay under pressure if AWS does not deliver blowout numbers soon. Restructuring costs and asset write-downs add to the strain.

Investors now watch how rivals like Microsoft and Google handle their own AI bills. Amazon's moves come as the tech sector shifts from blind AI hype to picking winners based on execution. The consensus analyst target sits around $296, suggesting upside from current levels near $233, but volatility will persist.

Leadership changes aim to sharpen focus. Dharmesh Mehta shifted to advise CEO Andy Jassy on tech matters, while Amit Agarwal took over seller services to improve marketplace tools. Amazon also tests AI for film and TV production through MGM, which could cut costs for Prime Video down the line.

Directors have sold small stakes recently, like Keith Brian Alexander offloading 900 shares at $233 each. These moves are routine but noted by traders. Overall, the market sees Amazon's path tied to balancing massive investments with returns, in a year when AI costs test even the biggest players.