Amazon shares plunged nearly 10% in after-hours trading Thursday after the tech giant unveiled a staggering $200 billion capital expenditure plan for 2026, a figure that shocked Wall Street and overshadowed otherwise solid fourth-quarter results. The massive spending blueprint—roughly 60% above analyst expectations—signals Amazon's aggressive push to dominate the artificial intelligence infrastructure race, but investors immediately questioned the near-term impact on profitability and free cash flow.
How Amazon's Spending Bombshell Unfolded
At first glance, Amazon's Q4 2025 earnings report appeared robust. The company reported net sales of $213.4 billion, a 14% year-over-year increase that slightly exceeded consensus estimates of $211 billion. Amazon Web Services (AWS) delivered particularly strong results, with revenue climbing 24% to $35.6 billion—its fastest growth rate in over three years. Yet the earnings per share of $1.95 narrowly missed expectations by a cent, setting the stage for what would become a dramatic after-hours selloff.
The real shock came during the earnings call when Amazon CEO Andy Jassy outlined capital expenditure plans for 2026 totaling approximately $200 billion. Wall Street had been expecting around $146 billion, making the announcement a massive upside surprise that immediately raised red flags about cash flow and return timelines. "We have confidence that these investments will yield strong returns on invested capital," Jassy told investors, but his reassurance did little to calm market nerves.
Timeline: From Earnings Release to Market Panic
The sequence of events unfolded rapidly on February 5-6, 2026. At 4:05 PM ET on Thursday, Amazon released its Q4 2025 results showing record revenue but a slight profit miss. By 4:30 PM, during the earnings call, executives detailed the $200 billion capex plan for 2026. Within minutes, after-hours trading saw Amazon shares drop 5%, then 7%, eventually settling around 9-10% down by 5:30 PM. By Friday's pre-market session, the stock remained under heavy pressure, trading around $202-210 per share—a stark decline from Thursday's close near $223.
Why Amazon's Spending Spree Worries Investors
Analysts quickly identified several concerns driving the selloff. First, free cash flow has already been under pressure, declining sharply over the past year to approximately $11 billion from much higher levels previously. The new spending plan suggests further compression ahead, even if management promises long-term payoffs. Second, AWS margins could face headwinds as AI infrastructure costs—including servers, power consumption, and depreciation—rise dramatically. Given that AWS contributes the majority of Amazon's profits, any margin erosion there directly impacts the overall investment thesis.
"The market wants results now, not in 2030," noted FXEmpire's analysis. "With interest rates still elevated and recession fears lingering, investors are less willing to wait patiently while companies spend heavily with no clear timeline for payoff." This sentiment was echoed across trading desks, where the sheer scale of the spending increase—$54 billion above expectations—triggered fundamental questions about capital discipline.
Where Things Stand Now: Market Reaction and Sector Impact
As of Friday morning trading, Amazon shares remained under pressure, down approximately 8-9% from Thursday's close. The decline contributed to broader weakness in technology stocks, particularly those with significant AI investment plans. However, chip stocks like Nvidia saw modest gains on expectations they would benefit from increased data center spending by Amazon and other cloud providers.
Notably, Amazon's stock broke below both its 50-day moving average (around $233) and 200-day moving average (around $223), a technical breakdown that could invite further selling pressure. The after-hours plunge to the $202-210 range placed the stock within a key retracement zone that traders are watching closely for potential support or further downside.
What Happens Next: The Road Ahead for Amazon
Amazon now faces the challenge of convincing investors that its unprecedented spending will generate adequate returns. The company will need to provide more granular details about expected ROI timelines and specific AI initiatives. Management may also face pressure to moderate spending if free cash flow deteriorates more than anticipated or if macroeconomic conditions weaken.
Longer term, the success of this investment surge will likely determine Amazon's competitive position in the AI era. If the company can establish dominant infrastructure while maintaining reasonable profitability, today's selloff could be remembered as a buying opportunity. If not, investors may continue to question whether Amazon is overbuilding in a race where multiple tech giants are making similar massive bets.
The Bottom Line: Key Points to Remember
Amazon's stock decline wasn't driven by weak current earnings but by fears about future spending. The $200 billion capex plan for 2026 represents a bold gamble on AI infrastructure that could reshape the company's future—but at the cost of near-term profitability concerns. Investors should watch free cash flow trends, AWS margin performance, and management's communication about return timelines in the coming quarters. For now, the market has delivered a clear verdict: unprecedented spending requires unprecedented justification.
