Bearish news strikes! Tech giants, plummeting

Huge Capital Expenditure Under Scrutiny

On February 5th (Thursday) local time, tech giant Amazon (NASDAQ: AMZN) released its Q4 2025 earnings report. The report showed a mixed performance with “revenue exceeding expectations and earnings per share slightly below forecasts,” while announcing that capital expenditures in 2026 are expected to reach as high as $200 billion. This investment plan, far surpassing market expectations, caused the company’s stock price to plummet over 11% in after-hours trading.

Huge Capital Expenditure Under Scrutiny

The earnings report revealed that Amazon’s total revenue for Q4 2025 reached $213.39 billion, beating analysts’ forecast of $211.33 billion; however, earnings per share (EPS) were $1.95, up from $1.86 in Q4 2024 but slightly below the market expectation of $1.97.

Among key business segments, Amazon Web Services (AWS), a major growth driver, performed strongly. AWS revenue for the quarter was $35.58 billion, a 24% year-over-year increase. Amazon CEO Andy Jassy stated that this was the fastest growth rate in nearly 13 quarters. Meanwhile, the advertising business also showed robust growth, with revenue of $21.32 billion, slightly above the $21.16 billion forecast, up 23% year-over-year, continuing to be a significant profit contributor.

Geographically, North America sales increased 10% year-over-year to $127.1 billion, while international sales grew 17% to $50.7 billion. Excluding currency effects, international sales growth was 11%.

One of the most market-focused aspects of the earnings report was Amazon’s announced capital expenditure plan for 2026, estimated to reach approximately $200 billion. This figure not only represents a significant increase from the actual $13.1 billion spent in 2025 but also far exceeds the analyst forecast of $14.66 billion from FactSet and even surpasses the $17.5 billion to $18.5 billion capex announced by Google’s parent company Alphabet during the same period.

Jassy explained that such a large-scale investment is mainly driven by strong demand for Amazon’s existing services and major opportunities in AI, chips, robotics, and low Earth orbit satellites. He emphasized that these investments will primarily flow into AWS, focusing on data centers and related infrastructure to meet the surging AI demand. “Customers are eager to leverage AWS for core business and AI workloads. We are rapidly expanding capacity and commercializing these capabilities,” Jassy said. “Based on AWS’s years of precise demand forecasting, we are confident these investments will generate strong long-term returns.”

It is reported that Amazon launched a $11 billion AI data center project called “Project Rainier” in October 2025, specifically for Anthropic workloads. During the earnings call, Jassy further revealed that growth in non-AI workloads on AWS has also exceeded expectations, which is a key reason for increasing infrastructure investments.

Affected by the lower-than-expected EPS and the massive capital expenditure plan, Amazon’s stock fell 4.56% during regular trading on Thursday, with the decline widening to over 11% in after-hours trading. Market analysts believe that investors are concerned about short-term profit pressures and the long cycle of returns from large-scale investments, especially amid the current sensitivity in US tech stocks to valuation adjustments driven by AI investment enthusiasm.

Long-term Focus on AI and E-commerce Integration

For Q1 2026, Amazon provided guidance indicating that sales are expected to be between $173.5 billion and $178.5 billion, representing an 11% to 15% year-over-year increase, slightly above the analyst forecast of $175.6 billion. The company stated it will continue to focus on integrating AI technology across all business segments, particularly in e-commerce, where its AI shopping assistant Rufus has 300 million users, with customer conversion rates 60% higher when using the assistant. Jassy introduced the concept of “Agentic Shopping,” believing that compared to general AI agents, retailers with extensive product choices, low prices, fast delivery, and customer trust will hold a competitive advantage in the AI era of e-commerce.

Despite short-term market concerns over high capital expenditures, Amazon’s management remains confident in long-term growth. Jassy articulated the “AI Pendulum Market” view, noting that on one end, there is massive compute demand from labs like Anthropic, and on the other, enterprise productivity optimization needs. He emphasized that enterprise workloads will be the “largest and most enduring market,” asserting that “AI growth has only just begun.” As the $200 billion capex plan is gradually implemented, Amazon’s infrastructure and R&D in AI will deepen, making its future performance and market competitiveness worth watching.

It is noteworthy that Amazon’s large-scale capex plan is not an isolated case. Recently, global tech giants have also increased investments in AI: Alphabet, Google’s parent company, announced that its 2026 capital expenditure is expected to be between $175 billion and $185 billion; Meta stated that its 2026 capex could nearly double that of 2025, reaching $115 billion to $135 billion. Industry analysts generally believe that a “arms race” in AI infrastructure and technology R&D has already begun, and Amazon’s $200 billion investment will further intensify this competition.

Strategic Company Layout: In-house Chips and AI Ecosystem, Cost Optimization through Layoffs

During the earnings call, Amazon’s management also disclosed several key strategic initiatives. In AI technology, the company is actively promoting its self-developed chip products to address the current high costs and limited supplier price reductions in the AI chip market. Amazon’s self-developed Trainium chips have performed well, with over 1.4 million units of the Trainium 2 deployed, making it the fastest ramp-up in company history; the latest Trainium 3 chips offer a 40% cost-performance improvement over the previous generation, with nearly all supply expected to be booked by mid-2026. Currently, Amazon’s self-developed chip business (including Graviton and Trainium) has annualized revenue exceeding $10 billion, with triple-digit YoY growth.

In AI ecosystem collaborations, Amazon’s partnership with Anthropic on “Project Rainier” is progressing smoothly, with Anthropic building next-generation large models based on Trainium 2 chips, involving 500,000 chips. Jassy also responded to questions about the partnership with OpenAI, emphasizing that “the AI movement will belong to thousands of companies, not just a few,” demonstrating an open ecosystem approach.

Additionally, to optimize costs, Amazon has been continuously adjusting its workforce. After laying off about 14,000 employees in October 2025, the company announced last week another reduction of 16,000 corporate staff. The earnings report showed that in Q4 2025, the company recorded $730 million in severance costs, along with $1.1 billion for resolving tax disputes and legal settlements related to its Italian stores, and $610 million in asset impairments for physical stores. These special expenses totaled $2.4 billion, impacting operating profit for the quarter. As of December 2025, Amazon’s global workforce totaled 1.57 million, a 1% increase year-over-year, mainly consisting of warehouse employees.