Amazon is making a long-term bet on artificial intelligence by planning around $200 billion in capital spending in 2026. The investment marks an increase of more than 50% from the around $130 billion spent the previous year, making it one of the largest capital spending programs ever announced by a single company. Most of the money will be directed toward expanding Amazon Web Services, where demand for AI computing has been rising quickly as businesses build and run large-scale AI models.
Notably, AWS has become a primary battleground in the AI race as enterprises increasingly demand massive computing power to train and deploy large language models, recommendation systems, and automation tools. Amazon plans to use the capital to expand data centers globally, deploy more advanced servers optimized for AI workloads, and accelerate the rollout of its custom-designed chips, including Trainium and Graviton processors. These chips are intended to reduce dependence on third-party suppliers while lowering costs for customers running compute-intensive AI applications.
Beyond cloud infrastructure, the spending plan also covers logistics automation, robotics, and Project Kuiper, Amazonâs low-Earth-orbit satellite initiative aimed at delivering global broadband connectivity.
However, the announcement worried financial markets, sending Amazonâs shares sharply lower, with the stock falling by double-digit percentages at one point and wiping out hundreds of billions of dollars in market value. The sell-off reflected investor concerns that the aggressive spending could weigh on near-term profits and free cash flow, especially since analysts had expected capital expenditures of around $140 billion.
These concerns come despite Amazon reporting strong recent financial performance. During the fourth quarter of its latest fiscal year, the company reported net sales of $213.4 billion, up 14 % year-over-year from $187.8 billion in Q4 2024, driven by solid holiday sales, expanding advertising revenue, and renewed momentum at AWS. Operating income climbed to $25.0 billion, and net income reached $21.2 billion ($1.95 per diluted share) compared with $20.0 billion a year earlier, although the earnings per share slightly missed consensus estimates.
AWS revenue alone climbed to $35.6 billion for the quarter, growing at around 24% year over year, marking its fastest quarterly growth in more than three years and raising its annualized revenue run rate to around $142 billion. AWS also generated about $12.5 billion in operating income, representing a healthy operating margin near 35 %, even as the business scales capacity for AI and enterprise workloads. The advertising business posted strong momentum too, with revenue up 22% to $21.3 billion. But despite this solid performance across segments, Amazonâs free cash flow declined sharply due to a around $50.7 billion increase in capital expenditures, largely driven by investments in AI infrastructure and data centers ahead of its ambitious spending push.
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