TLDR
- Amazon stock plunged 9% after reporting Q4 results and revealing a $200 billion capital expenditure plan for 2026.
- The company missed earnings expectations with EPS of $1.95 versus $1.96 forecast but exceeded revenue estimates at $213.4 billion.
- AWS posted 24% revenue growth, beating the 22% Wall Street estimate, with customer backlog expanding 40% faster than revenue.
- Scotiabank and Bank of America both lowered price targets to $275 while keeping positive ratings on the stock.
- The capex jump from $130 billion in 2025 to $200 billion in 2026 exceeded analyst expectations by roughly $50 billion.
Amazon reported fourth-quarter earnings on February 5 that sent shares into a tailspin. The stock dropped nearly 9% the following day as investors processed the company’s aggressive spending plans.
Earnings per share came in at $1.95, just below the $1.96 Wall Street consensus. Revenue showed strength at $213.4 billion, up 13.6% from last year and topping forecasts by $2.17 billion.
The cloud computing division posted impressive numbers. AWS revenue growth hit 24%, beating analyst predictions of 22% and showing acceleration from the previous quarter.
Why Investors Are Concerned
CEO Andy Jassy announced the company will spend roughly $200 billion on capital expenditures throughout 2026. That marks an increase of more than 50% compared to the $130 billion deployed in 2025.
Wall Street had modeled approximately $150 billion in spending. The actual guidance came in $50 billion higher than expected.
Amazon finished 2025 with $90.1 billion in cash and cash equivalents. The company generated $77.7 billion in net income for the full year, representing 31% growth. Long-term debt stands at $68.8 billion.
The math suggests Amazon will need to take on additional debt to reach the $200 billion target. The bulk of spending will support AWS expansion and proprietary AI chip development.
First-quarter revenue guidance came in between $173.5 billion and $178.5 billion. The midpoint topped analyst forecasts but margin projections disappointed.
Analysts Reassess Their Outlook
Bank of America’s Justin Post reduced his price target to $275 from $286. He maintained a Buy rating despite the cut, citing margin volatility concerns and sector-wide valuation pressure.
His new target implies approximately 31% upside from current trading levels. Post’s analysis values AWS at 8 times projected 2027 sales.
The analyst noted Amazon isn’t alone in ramping up AI infrastructure spending. He believes the investment makes sense given AWS’s leading market position and customer base.
Management characterized AI as an “unusual opportunity” that will pull more workloads to the cloud. The company expects to monetize new capacity quickly as demand continues rising.
Amazon unveiled Project Rainier last October, a computing cluster built with 500,000 Trainium2 chips. Anthropic uses the infrastructure to train its AI models. Jassy indicated the cluster will keep expanding.
The total customer backlog reached $244 billion. A large portion likely represents commitments from Anthropic and OpenAI, though Jassy didn’t break out specific customer contributions.
Neither AI company has turned profitable yet. That creates risk if Amazon builds capacity for customers who later struggle financially.
The company started shipping Trainium3 chips in December 2025. The upgraded processors offer 40% better price-to-performance ratios than Trainium2. Jassy said demand will absorb nearly all Trainium3 inventory by mid-2026, with Trainium4 development underway.
Scotiabank reduced its price target to $275 from $300 while maintaining a Sector Outperform rating. The firm highlighted weak operating income results and struggling international margins alongside the capex concerns.
Wall Street sentiment remains largely positive. Among 43 analysts tracking the stock, 38 recommend buying and 5 suggest holding. The average price target of $283.43 indicates potential gains of 35% over the coming year.
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