Amazon Bets Nearly 800 Billion on AI, Sparking Concerns

(Washington, Feb 6) Amazon on Thursday (Feb 5, local time) reported its latest quarterly earnings. While revenue came in slightly above market expectations, the company raised its capital expenditure outlook, projecting total investment of up to US$200 billion (about RM790.5 billion), far exceeding prior forecasts. The move sparked concerns over near-term profit pressure, sending shares down more than 10% in after-hours trading.

Amazon said capital spending on property and equipment is expected to reach about US$130 billion (around RM513.8 billion) in 2025, compared with analysts’ earlier estimates of roughly US$150 billion (about RM592.9 billion).

Long-term returns expected to be attractive

Chief executive Andy Jassy said in a statement that strong demand for Amazon’s existing products and services, together with opportunities in AI, chips, robotics and low-Earth-orbit satellites, underpin the company’s plan to invest around US$200 billion in 2026. He added that the company expects these investments to generate compelling long-term returns.

Speaking on an earnings call, Jassy said the spending would be “primarily” directed toward Amazon Web Services (AWS). He noted that non-AI workloads are growing faster than expected, while AI demand remains robust, with Amazon racing to convert new capacity into revenue. In October last year, the company launched Project Rainier, a US$11 billion data center investment dedicated to supporting AI workloads for Anthropic.

AWS posted fourth-quarter revenue growth of 24% year-on-year to US$35.58 billion (about RM140.65 billion), marking its fastest growth in 13 quarters and beating market expectations of 21.4%. However, competition in the cloud market remains intense. While AWS remains the market leader, Microsoft Azure grew 39% last quarter, and Google Cloud revenue rose about 48%, both outpacing AWS.

Overall, Amazon reported quarterly revenue of US$213.39 billion (about RM843.53 billion), above consensus estimates, though earnings per share of US$1.95 fell slightly short of the US$1.97 forecast. The company guided current-quarter revenue to between US$173.5 billion and US$178.5 billion, implying year-on-year growth of 11%–15%, broadly in line with expectations. Net profit rose year-on-year to US$21.19 billion (about RM83.76 billion), underscoring resilience in its core operations.

Cost pressures persist

Despite the strong results, cost pressures have yet to ease. Amazon continues to streamline its workforce, announcing last week the layoff of about 16,000 corporate employees. As of the end of last year, the company employed around 1.57 million people globally, with headcount growth of just 1% year-on-year, mainly driven by warehousing and logistics.

Peers such as Alphabet and Meta have also recently raised AI-related spending, signaling a new round of capital competition among tech giants. This has led investors to question whether AI demand can ultimately justify such massive investment outlays.

Gil Luria, head of technology research at DA Davidson & Co, said the negative market reaction reflects concerns that capital expenditure growth is significantly outpacing AWS revenue growth, raising fears that Amazon and its peers may be locked in an escalating expansion cycle with uncertain returns.

Amazon shares fell 10.02% in after-hours trading. During regular New York trading hours, the stock dropped 4.42% to close at US$222.69, bringing its year-to-date decline to about 3.5%.