Amazon (AMZN) did all the right things this quarter. In short, AMZN didn’t suffer an earnings problem this quarter. But it did have a price-tag problem.
Amazon posted a clean win in the earnings report. A clean top-line beat and its fastest AWS growth in 13 quarters is usually cause for celebration. However, surprisingly, the reaction of the markets was incredibly different.
The stock fell as much as 9% on Friday, Feb. 6, Reuters reported.
Why is that? Well, investors are fixating on the return profile of a $200 billion capital expenditure plan for 2026.
Bank of America’s takeaway gets right to the point.
BofA reiterated a buy rating with a $275 price target, TheFly reported. Analysts also said the expenditure was not a show of strength, but a necessary cost of remaining ahead in AI and cloud.
Amazon CEO Andy Jassy’s own language was similarly direct.
Once again, Amazon’s fourth-quarter performance met expectations, declaring the kind of fundamentals that were required to calm the tape.
Net sales:$213.4B, up 14% year over year
Operating income:$25.0B (or $27.4B, excluding one-time charges)
Net income:$21.2B, $1.95 per diluted share
AWS sales:$35.6B, up 24% year over year
One thing I find noteworthy, after several years covering Amazon, is how important AWS is becoming for Amazon.
AWS remains Amazon’s bread and butter; AWS operating income was $12.5B in Q4.
BofA’s framing fits with that profit mix. Analysts noted that AWS’s growth exceeded expectations and accelerated from one quarter to the next as more capacity came online.
Here’s the line that explains why investors immediately pivoted from “nice quarter” to “prove it.”
Free cash flow:$11.2B, down from $38.2B a year earlier
Operating cash flow:$139.5B, up 20%
What’s interesting is that Amazon pegs this issue as a forward-looking strategy.
That’s why the $200B capex target is hitting hard. This does not imply that Amazon has increased spending in this area for the first time.
Given its size, Amazon’s capital expenditure plan came as no surprise. However, the market reaction was due to one important fact: It comes at a critical time in the AI debate.
The market is currently debating whether hyperscalers are transforming from “asset-light” platforms into capital-heavy operators.
More Tech Stocks: