The e-commerce giant announced its Q4 financial results yesterday, and while many were expecting a triumphant year-end, the stock plunged by as much as 10% after the close.
QUARTERLY EARNINGS
Amazon announced Q4 revenue of $213.4 billion, slightly beating expectations. Sales in North America rose 10%, international markets grew 17%, and its cloud business, AWS, posted revenue of $35.6 billion, above estimates.
Advertising also performed solidly, reaching $21.3 billion, just above consensus.
Operating income came in at $25 billion, while free cash flow, although still positive, dropped to $11.2 billion, mainly because Amazon invested more than $50 billion in infrastructure.
And this is where the “problems” begin for some.
Amazon’s stock fell by as much as 10% after the announcement, having already closed the regular session down 4.4%.
Why? Not because the numbers were bad. Quite the opposite.
But because the company announced something that scared investors. It forecasts capital expenditures of $200 billion for 2026.
And no, that is not a mistake. $200,000,000,000. About 40% more than what the market was expecting.
CEO Andy Jassy was clear: “With such strong demand for our products and opportunities like AI, chips, robotics and satellites, we will invest $200 billion to position ourselves properly for the future.”
Naturally, some investors viewed this level of investment as excessive.
PRIORITY ON AI
Behind the $200 billion, however, there is not simple “overspending”.
There is strategy. And a very well organized one. That is evident from the moves the company is already making.
To start with, Amazon signed a new agreement with Prosus for AWS and AI services worth hundreds of millions of dollars. According to Prosus management, the deal secures double-digit cost reductions for their company.
At the same time, through Amazon MGM Studios, Amazon is building an AI Studio aimed at changing how content is created for films and series. The goal is to reduce production costs without eliminating the role of creators. The project is so ambitious that it operates internally like a startup.
And the cherry on top?
Amazon is in talks with OpenAI, aiming to develop custom AI models for use in products like Alexa. At the same time, it already collaborates with Anthropic, the rising competitor to OpenAI, on AI tools for shopping, coding and data search.
