Amazon AMZN shares plunged about 10% in extended trading on Thursday after the company reported mixed fourth-quarter results and announced a higher capital expenditure outlook for 2026.
The company posted earnings per share of $1.95, below the Zacks Consensus Estimate of $1.98, while revenues of $213.39 billion came in stronger than the Zacks Consensus Estimate of $211.46 billion. Earnings grew about 4.8% year over year while revenues surged 13.6%.
Inside Key Business Segments Performance
Key business segments delivered solid performance during the quarter. Amazon Web Services (AWS) generated $35.58 billion in revenues (up 24% year over year), surpassing expectations of $34.93 billion, while the advertising segment brought in $21.32 billion (up 23% year over year), also topping forecasts, as quoted on CNBC.
Inside AWS Growth
AWS revenue grew 24% year over year, topping projections for 21.4% growth, with CEO Andy Jassy highlighting that the cloud unit logged its fastest growth in 13 quarters, per the above-mentioned CNBC article.On the earnings call, Amazon CEO Jassy said that the company had a backlog of $244 billion worth of AWS revenue, up 40% year over year, as mentioned on Sherwood News.
Despite strong AWS growth, competition in the cloud market remains stiff. Microsoft Azure recently reported 39% growth, while Google Cloud revenue rose about 48%, marking its fastest expansion since 2021.
Increased Capex Guidance for 2026
Amazon said it plans to increase capital expenditures as it accelerates investments in artificial intelligence (AI) infrastructure. Amazon expects capex to reach about $200 billion in 2026, well above analyst estimates of $146.6 billion and significantly higher than roughly $131 billion spent in 2025, as mentioned on CNBC.
The spending will focus on AI-related initiatives, including data centers, custom chips, robotics, and low-earth-orbit satellite projects. Most of the investment would be directed toward AWS, where both AI and traditional workloads are growing faster than expected. The company recently launched Project Rainier, an $11 billion AI data center built to support workloads from Anthropic.
Investors probably viewed the huge capex announcement with skepticism. They are increasingly concerned about when these heavy AI investments will begin to produce substantial returns.
Looking Ahead
Going forward, Amazon expects first-quarter sales to range between $173.5 billion and $178.5 billion, representing growth of 11% to 15%, compared with the Zacks Consensus Estimate of about $175.47 billion.
What About Valuation?
Amazon shares trade at a Price/Earnings (P/E) multiple of 32.91X on trailing twelve-month basis. This compares with the S&P 500 P/E of 28.996X (per Guru Focus). Price/Book (most recent quarter) multiple stands at 6.74X for Amazon versus 5.44X offered by the S&P 500 (per Guru Focus).
The stock is down 6.8% over the past year, off 1.7% year to date and down 7.6% over the past month. This goes against the S&P 500’s 11.8% past-year gains, 0.8% year-to-date loss and 2.1% past-month decline.
Amazon stock underperformed the Roundhill Magnificent Seven ETF MAGS too over the past one-year and one-month time frames. MAGS has gained 13.4% past year, and has lost 4.3% past month. This shows that the Amazon stock doesn’t boast a lofty valuation and has been beaten-down in recent times.
Buy the Dip With ETFs?
Amazon’s Q4 miss and massive capex outlook have been laggards. However, Amazon should gain ahead if it maintains its relationship with AI start-up Anthropic. Anthropic’s API business could be a good revenue driver for the company, as indicated by Barclays in Sept. 2025, per investing.com, as quoted on Yahoo Finance.
But then, Amazon has joined the bandwagon of higher AI-related capex in recent years. If AI is the future of the tech world, sooner or later the payoff will be realized. Initial days of investments could be about a roller-coaster ride, but the long-term looks bright for the Big Tech pack.
The above-said Investing. Com article also noticed that analysts added that a few large AI labs, including OpenAI and Anthropic, “are generating the bulk of AI revenue for the hyper-scalers today.” This is why investors’ tensions toward return-on-investments have risen Big Tech announces big capex plans.
Investors can thus play Amazon stock with exchange-traded funds (ETFs) like ProShares Online Retail ETF ONLN, State Street Consumer Discretionary Select Sector SPDR ETF XLY, Vanguard Consumer Discretionary ETF VCR and Fidelity MSCI Consumer Discretionary Index ETF FDIS.
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report State Street Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports Fidelity MSCI Consumer Discretionary Index ETF (FDIS): ETF Research Reports ProShares Online Retail ETF (ONLN): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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