Amazon's Capital Expenditure Estimate Rises: Expectations Remain Low

Amazon's Fourth Quarter Results and Capital Expenditure

Amazon disappointed investors with its fourth quarter results. The company reported revenue of $213.39 billion; however, its earnings per share came in at $1.95, failing to meet analysts' expectations of $1.97. At the same time, it drew attention by raising its capital expenditure forecast to $200 billion for 2026.

Cloud Unit and Advertising Revenues

Amazon Web Services (AWS) surpassed the analysts' revenue expectation of $34.93 billion, generating $35.58 billion in the fourth quarter. AWS revenues showed a 24% increase, exceeding analyst forecasts by two percentage points. This was described by CEO Andy Jassy as "the fastest growth for AWS in 13 quarters." Additionally, the company's advertising unit reported revenue of $21.32 billion, in line with the consensus of $21.16 billion.

Investments in Artificial Intelligence and Infrastructure

Amazon is making significant investment decisions in data centers and other infrastructures to respond to the growing demand for artificial intelligence. The company's capital expenditure forecast for 2026 stands out as a figure well above the analysts' estimate of $146.6 billion. Jassy stated, "Due to the high demand for our current products, opportunities in artificial intelligence, and various innovations such as chips and robotics, we expect Amazon to make approximately $200 billion in capital expenditures by 2026."

Market Competition

Amidst increasing competition in the cloud infrastructure market, Amazon is taking rapid steps to avoid losing ground to rivals like Google and Microsoft. Microsoft Azure recorded a 39% growth, while Google’s cloud revenues rose by 48%. Last October, Amazon took steps to meet artificial intelligence workloads with the $11 billion Project Rainier data center it built. For the next quarter, Amazon expects sales to be between $173.5 billion and $178.5 billion.

In conclusion, Amazon's fourth quarter results and capital expenditure forecast not only caught investors' attention but also highlighted the challenges the company is facing.