Amazon’s shares fall after announcing plan to increase capital spending by 60%

Amazon sales surged 14% during the fourth quarter, helped by strong holiday spending and a better-than-expected growth in its prominent cloud computing unit.

But shares fell 11% in after hours trading on Thursday as investors appeared to be spooked by the Seattle-based tech company’s plans to increase capital spending by nearly 60% to $200 billion from last year’s $128 billion as it sees opportunities in artificial intelligence, robots, semiconductors and satellites. The company’s fourth-quarter profits also were slightly below analysts’ projections.

Wall Street analysts were expecting capital spending to rise to around $147 billion this year, according to FactSet.

Amazon’s CEO Andy Jassy told investors on the call following the earnings release that it anticipates strong long-term return on the invested capital.

“We are continuing to see as fast as we install this capacity, this AI capacity, we are monetizing it,” Jassy said. “So it’s just a very unusual opportunity. I passionately believe that every customer experience that we know of today is going to be reinvented.”

The results come as Amazon is slashing about 16,000 corporate jobs in the second round of mass layoffs for the e-commerce company in three months. Amazon said in an emailed statement last week that AI was “not the reason behind the vast majority of these reductions.” Rather, the cuts had more to do with eliminating layers to drive speed.

Separately, Amazon said last week it would cut about 5,000 retail workers, according to notices it sent to state workforce agencies in California, Maryland and Washington, resulting from its decision to close almost all of its Amazon Go and Amazon Fresh stores.

That’s on top of a round of 14,000 job cuts in October, bringing the total to well over 30,000 since Amazon’s Jassy first signaled a push for AI-driven organizational changes.

Analysts are analyzing retailers’ performances for insight into how shoppers spent during the holidays and what’s in store for 2026.

Amazon is also under pressure to shore up confidence that its computing arm Amazon Web Services is just as powerful as Microsoft’s Azure and Google’s Google Cloud platform.

Amazon delivered 24% growth for AWS in the fourth quarter, the fastest in 13 quarters, the company said. That followed a 20% growth in the third quarter and a 17.5% increase in the second quarter. In comparison, Google parent Alphabet said Wednesday that its cloud business registered a 48% increase, or nearly $18 billion in revenue.

Meta, Apple and other Big Tech firms are expected to ramp up their spending on artificial intelligence this year. After investing $91 billion into capital expenditures devoted mostly to AI, Alphabet said Wednesday that it expects to double down by spending another $175 billion to $185 billion this year.

Amazon also continues to invest in its speedy fulfillment network, through a combination of robotics, AI technology and more efficient warehousing.

Amazon’s new service called Amazon Now, an ultra-fast delivery that offers delivery on thousands of items in 30 minutes or less, is now available in various cities in India, Mexico and the United Arab Emirates and is being tested in several communities in the U.S. and the United Kingdom, the company said.

Amazon is also expanding its same-day grocery delivery to more than 2,300 cities and towns across the U.S.

Jassy told investors the company continues to see strong customer response to everyday essentials and groceries.

Meanwhile, Amazon is closing almost all of its Amazon Go and Amazon Fresh locations as it narrows its focus on food delivery and its grocery chain, Whole Foods Market.

Some of the shuttered stores will be converted into Whole Foods locations, the company said in a blog post last week.

Amazon reported net income of $21.2 billion, or $1.95 per share, for the three-month period ended Dec. 31. That compares with $20 billion, or $1.86 per share, in the year-ago quarter.

Revenue rose to $213.4 billion in the fourth quarter, compared with $187.8 billion in the year-ago period.

Analysts were expecting $1.97 per share on sales of $211.4 billion, according to analysts polled by FactSet.

Revenue from Amazon Web Services reached $35.6 billion. Analysts were expecting $34.9 billion.

Product sales during the holiday period rose 9.4%, the company said.

The company said that it expects sales to be between $173.5 billion and $178.5 billion for current quarter.

Analysts are projecting $175.6 billion.

—Anne D’Innocenzio, AP Retail writer