Amazon’s fourth-quarter earnings report revealed a complex picture of growth and investment, sending the company’s stock down more than 10% on . While revenue beat expectations, reaching $213.4 billion – a 12% increase year-over-year excluding foreign exchange fluctuations – concerns over a massive planned increase in capital expenditure overshadowed the positive results.
Mixed Earnings Performance
The company reported earnings per share of $1.95, slightly missing the consensus estimate of $1.97. However, several segments demonstrated robust performance. North American sales totaled $127.1 billion, up 10% year-over-year, while international sales grew by 17% to $50.7 billion. Amazon Web Services (AWS), the company’s cloud computing division, continued its strong trajectory, generating $35.6 billion in revenue – a 24% increase, marking its fastest growth rate in 13 quarters.
Advertising revenue also proved to be a significant contributor, reaching $21.3 billion in the fourth quarter, a 22% year-over-year increase. For the full year 2025, Amazon generated $68 billion from advertising. The company highlighted the success of its “Thursday Night Football” broadcasts on Prime Video, which saw a 16% year-over-year increase in viewership, averaging over 15 million viewers this season.
A $200 Billion Bet on the Future
The primary driver of investor concern was Amazon’s announcement of a planned $200 billion capital expenditure for 2026. This figure significantly exceeds analysts’ previous expectations of $146 billion and signals a substantial commitment to infrastructure, particularly for AWS and artificial intelligence (AI) development. The increased spending is intended to meet the growing demand for AI technologies, according to Amazon CEO Andy Jassy.
“It’s kind of unbelievable if you look at the demand of what you’re seeing already with AI, but the lion’s share of that demand is still yet to come,” Jassy stated during the earnings call. He emphasized that the demand will increase as more companies develop AI talent and as the cost of AI inference decreases, a goal Amazon is pursuing through its Trainium hardware strategy.
AWS Custom Chips and Agentic Commerce
Amazon highlighted the success of its AWS custom chips, which have reached an annual revenue run rate of over $10 billion, experiencing triple-digit percentage year-over-year growth. This demonstrates the company’s increasing focus on controlling its own hardware destiny and optimizing performance for its cloud customers.
The company is also heavily invested in “agentic commerce,” leveraging its internal AI assistant, Rufus, to enhance the shopping experience. Rufus is currently used by 300 million shoppers and contributed $12 billion in sales in 2025. This initiative reflects Amazon’s broader strategy of integrating AI throughout its retail operations.
Cost Discipline and Operating Income
Despite the increased capital expenditure, Amazon demonstrated cost discipline in other areas. Operating income for the company reached $25.0 billion. Segment-level operating income showed improvements: North America at $11.5 billion (compared to $9.3 billion in the prior year’s fourth quarter), AWS at $12.5 billion (compared to $10.6 billion), and International at $1.0 billion (down slightly from $1.3 billion).
Layoffs Continue Amidst Investment
While investing heavily in future growth areas, Amazon continues to streamline its operations through workforce reductions. The company cut 16,000 corporate jobs in January, part of a series of layoffs initiated under Jassy’s leadership. This suggests a focus on efficiency and prioritizing investments in key strategic areas.
Investor Scrutiny of AI Spending
The market’s negative reaction to the earnings report underscores growing investor scrutiny of AI spending by tech giants. Investors are increasingly cautious about large capital investments in AI, recognizing that these are long-term bets with uncertain returns. The concern isn’t necessarily about the potential of AI, but rather the timing and magnitude of the investments required to realize those benefits.
Despite these concerns, Amazon’s leadership remains confident in its strategy. Jassy defended the aggressive spending, citing the substantial demand for the company’s technology and the long-term growth opportunities presented by AI. The coming year will be crucial in demonstrating whether Amazon’s massive investment in infrastructure will translate into sustained growth, and profitability.
