Amazon's stock dropped 11% in after-hours trading February 5 after the company projected $200 billion in capital expenditure for 2026. The figure dwarfs Wall Street's $146 billion estimate and exceeds Google's $175-185 billion guidance announced a day earlier.
The capex surge targets AWS AI infrastructure, custom chips, robotics, and satellites. AWS posted $35.6 billion revenue in Q4, up 24% year-over-year, with $12.5 billion in operating income. CEO Andy Jassy calls AI demand an "unusual opportunity" with rapid monetization potential.
The real question is whether the investment thesis holds. Amazon's trailing twelve-month free cash flow dropped to $11.2 billion from $38.2 billion previously, driven by $50.7 billion in equipment spending. Enterprise buyers should note this isn't just Amazon: Microsoft, Google, and Meta are all raising AI capex guidance simultaneously.
Jassy insists the investments will deliver "strong long-term ROI" with demand outpacing supply. He points to Amazon's in-house Trainium and Graviton chips, which are expected to generate over $10 billion in 2026 revenue. The company's partnership with Anthropic provides another revenue angle beyond pure infrastructure.
Analysts are divided. JPMorgan questions payoff timelines given profit misses and sector rotation away from tech. Forrester's Lee Sustar flags capex as a looming earnings risk. The pattern is clear: Big Tech is betting heavily on AI infrastructure, but the market wants proof of returns.
What this means in practice: Cloud buyers have more negotiating leverage as providers race to fill capacity. But they should also pressure vendors on ROI metrics and implementation timelines. The infrastructure buildout is real, but so is the scrutiny.
Three things to watch: AWS Q1 2026 guidance ($173.5-178.5 billion sales, $16.5-21.5 billion operating income), competitors' capex revisions, and whether custom chip revenue meets projections. History suggests enthusiasm outpaces delivery in infrastructure cycles. We'll see if this time is different.