Amazon (AMZN 1.40%) demonstrated strong growth in the 2025 fourth quarter, as reported last week. Sales increased 12% year over year, beating analyst estimates, although earnings per share (EPS) of $1.95 missed expectations of $1.97.
However, the big talk after the report was management's announcement that it plans to spend $200 billion in capital expenditures in 2026. The market is starting to become wary of all of the artificial intelligence (AI) spending, impatient for results.
But management is envisioning the long runway, and it's setting itself up for success. Here's what it said, and why these investments could seriously pay off down the line.
Image source: Amazon.
Amazon's AI platform
There was a lot of positive news about how Amazon's AI platform is growing. Amazon Web Services (AWS), which is the company's cloud business and the largest of its kind by far, is enjoying accelerating growth, with a 24% year-over-year sales increase in the fourth quarter. That was its highest growth in 13 quarters. That's more impressive than it looks, since 13 quarters ago it was building on $21 billion, while now it's building on $36 billion. That implies a huge amount of more business in dollar terms.
Amazon is doing what Amazon does best, which is develop a product at a great price point to meet high demand. It already has a huge AI business with many exclusive products like its Bedrock platform, which developers can use to work with a large range of preset large-language models (LLM), and it offers the most powerful AI chips for its clients. But its clients are asking for well-priced AI training chips as ongoing training becomes expensive, and Amazon continues to roll out more powerful versions of its own Trainium chips, which it says are 30% to 40% more cost-effective than similar graphics processing units (GPU). Trainium2 has more than 100,000 users, and Trainium3, which is 40% more cost-effective than the previous model, was just launched. As of the earnings report, Trainium3 is almost entirely sold out through mid-2026, and Amazon is already developing Trainium4.
Another area where it's building out fast is in AI agents, which handle complex tasks without human intervention. One of its core services for coding is called Kiro, and users increased 150% consecutively in the fourth quarter.
"We are monetizing capacity as fast as we can install it," CEO Andy Jassy said. "We have deep experience understanding demand signals in the AWS business and then turning that capacity into strong return on invested capital."
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Will it pay off?
Despite that confidence, the market isn't giving it the leeway to make that happen. However, it already has a $200 billion backlog in AWS business, and Bedrock spend increased 60% sequentially in the fourth quarter, with a multibillion-dollar annualized run rate.
Many companies have made the mistake of not building out enough to meet rising demand, resulting in lost business over time. If it doesn't go to Amazon, it will go to one of its competitors. And there are many companies that the market was pessimistic about for similar reasons that rebounded as soon as the results came in.
Expect Amazon to keep winning in AI, and for its stock to eventually reflect that.
