Wall Street Shook by Amazon Earnings Miss and $200 Billion AI Spending Shocker

Amazon (Nasdaq: AMZN | AMZN Price Prediction) shares tumbled after the e-commerce and cloud giant reported fourth-quarter earnings on February 5, 2026, that missed revenue expectations and unveiled a staggering $200 billion capital expenditure plan for 2026. The stock closed at $222.69 on February 5, down 7.88% for the week. Wall Street analysts responded swiftly, with concerns mounting over whether Amazon’s massive AI infrastructure spending will deliver returns quickly enough to justify the investment.

EPS Miss Overshadows Revenue Beat

Amazon reported revenue of $213.4 billion, exceeding Wall Street forecasts of approximately $211.3 billion. However, the company missed profit expectations, reporting earnings per share (EPS) of $1.95, which was lower than the anticipated $1.98. Net income of $21.2 billion included $9.5 billion in pre-tax gains from Anthropic investments, while operating income of $17.4 billion was weighed down by $4.3 billion in special charges, including a $2.5 billion FTC settlement and $1.8 billion in severance costs.

The real gut punch came from the forward guidance. Amazon’s 2026 capital expenditures are projected to hit roughly $200 billion, a 50% increase year-over-year. That’s an eye-watering sum that dwarfs what most companies spend on anything, let alone AI infrastructure. Investors didn’t like it. The stock dropped 4.42% in trading following the announcement, and the selloff rippled across Big Tech, contributing to broader market losses.

AWS Growth Can’t Offset Spending Fears

There were bright spots. AWS revenue came in at $35.6 billion, up 24% year-over-year, marking a re-acceleration to the fastest growth rate since 2022. AWS operating income reached $12.5 billion, and CEO Andy Jassy highlighted momentum in AI services. Amazon’s custom Trainium2 chips grew 150% quarter-over-quarter and are now a multi-billion-dollar fully subscribed business. The company also added 3.8 gigawatts of power capacity over the past year to support AI workloads.

Analyst Reactions Mixed

Wall Street analysts have offered varied perspectives on Amazon’s earnings and spending plans. Oppenheimer raised its price target to $315 from $305, citing AWS momentum and projecting $7 billion in cumulative cost savings by fiscal 2027 from automation investments. The consensus analyst target price sits at $296.11, implying upside from current levels, though many of those targets were set before the earnings report. Analysts generally view the $200 billion spending as a necessary evil to defend AWS’s market share against rivals.

The AI Spending Arms Race

Amazon isn’t alone in ramping up AI capital expenditures. Alphabet announced plans to spend $175 to $185 billion on capex in 2026, nearly doubling from the prior year. Microsoft faced similar pushback after its January earnings, with the stock dropping 7% despite strong results, as investors worried about slowing cloud growth and higher-than-expected capital expenditures. Meta, by contrast, saw its stock surge 9% after delivering bullish guidance that demonstrated AI monetization success.

The difference? Execution and timing. Meta has shown it can turn AI investments into revenue growth. Amazon and Microsoft are still in the heavy spending phase, and the payoff remains uncertain. S&P Global projects hyperscalers will increase capital spending by nearly 40% in 2026, reaching almost $600 billion. That’s a massive bet on AI infrastructure, and the market is starting to question whether all that spending will generate proportional returns.

The Path Forward

Amazon now trades at a forward P/E of 28x, down from higher levels earlier this year. The company still commands a $2.38 trillion market cap, and 66 of 70 analysts maintain bullish ratings. But the near-term outlook hinges on whether Amazon can demonstrate that its AI spending will translate into revenue growth and margin expansion. Management sounded confident about AWS demand and AI adoption, but they’re asking investors to be patient while they build out infrastructure on an unprecedented scale.

Investors will want to keep an eye on free cash flow over the next few quarters. If it continues to decline while capex stays elevated, the pressure on the stock will intensify. The $200 billion spending plan is a bold move, but it’s also a risky one. Amazon is betting it can outspend competitors and capture a dominant share of the AI infrastructure market. Whether that bet pays off won’t be clear for some time.