Why Amazon’s CEO is ‘confident’ with $200 billion spending plan

AmazonThe company’s shares tumbled 11% in extended trading Thursday on market jitters around the company’s $200 billion capital spending plans, the highest spending forecast among megacap companies.

The forecast represents a sharp increase from Amazon’s capital spending last year, more than $50 billion above analysts’ expectations. company reported Approximately $131 billion will be spent on property and equipment purchases in 2025; This figure was approximately 83 billion dollars in the previous year.

Tech companies have laid out aggressive spending plans for AI infrastructure since OpenAI ushered in the modern era of this technology with the launch of ChatGPT in late 2022, but at the beginning of 2026, these generous commitments continued to grow.

google parent Alphabet On Wednesday, it said it would spend up to $185 billion in 2026, while last week Meta said capital spending could nearly double from last year to between $115 billion and $135 billion in 2026.

On a conference call with investors, Wall Street analysts pressed Amazon executives for more clarity about its spending blitz and when it might start paying off. CEO Andy Jassy said at the start of the call that he was “confident” the company’s cloud unit would see a “strong return on invested capital” but did not say when that might happen.

“Help us get to that point; get to your level of confidence in generating a strong long-term return on invested capital,” Mark Mahaney, head of internet research at Evercore ISI, told Jassy.

Jassy said the company needs capital to keep up with “very high demand” for Amazon’s AI computing, which requires more infrastructure such as data centers, chips and networking equipment.

“It’s some kind of quixotic, not-first-class grab,” Jassy said. “We believe these investments will deliver strong returns on invested capital. We’ve done that in our core AWS business. I think that will largely be true here as well.”

Amazon Web Services’ sales recently rose 24% to $35.6 billion, beating analysts’ expectations and marking the cloud unit’s “fastest growth in 13 quarters,” Jassy said.

AWS could grow faster if it had more capacity to meet demand, “so we’re being incredibly diligent about that,” he said.

Jassy noted that the company’s cloud unit added almost 4 gigawatts of computing capacity in 2025, and AWS expects to double that power by the end of 2027.

Barclays analyst Ross Sandler asked Jassy how he thought the AI ​​market would evolve from the current environment; this market is “somewhat concentrated, with most spending centered around a few AI-specific labs.”

Jassy said the AI ​​market has become a “barbell” with AI labs on one side and businesses on the other looking at the technology as a tool for “productivity and cost avoidance.” He said the middle consists of businesses in various stages of building AI applications.

“The middle part of the barbell may be the largest and most durable part,” Jassy said.

WRISTWATCH: Amazon shares fall on lack of earnings and $200 billion forecast for 2026 capex