Amazon's $200 Billion Capex Plan Triggers Stock Plunge
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5h ago
0mins
Should l Buy GOOGL?
Source: CNBC
- Capex Announcement: Amazon's announcement of a $200 billion capital expenditure plan for 2026, significantly above the $146.6 billion forecasted by analysts, has raised concerns about the company's ability to monetize these investments quickly, leading to a nearly 11% drop in after-hours trading.
- Earnings Highlights: In Q4 2025, Amazon reported a 14% year-over-year revenue increase to $213.39 billion, surpassing expectations of $211.33 billion; however, earnings per share of $1.95 fell short of the $1.97 estimate, indicating pressure on profitability.
- Cloud Business Performance: Amazon Web Services (AWS) revenue grew 23.6% year-over-year to $35.58 billion, exceeding estimates by $514 million, and while operating margins declined by 190 basis points to 35.03%, they still outperformed the consensus estimate of 33.98%, showcasing strong growth potential in the cloud segment.
- Future Guidance: Although Amazon expects Q1 2026 net sales to rise 11% to 15%, reaching between $173.5 billion and $178.5 billion, the projected operating income of $16 billion to $21.5 billion falls significantly short of the $22.18 billion consensus, reflecting market caution regarding its future profitability.
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Analyst Views on GOOGL
Wall Street analysts forecast GOOGL stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for GOOGL is 338.25 USD with a low forecast of 279.00 USD and a high forecast of 390.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
34 Analyst Rating
27 Buy
7 Hold
0 Sell
Strong Buy
Current: 333.040
Low
279.00
Averages
338.25
High
390.00
Current: 333.040
Low
279.00
Averages
338.25
High
390.00
About GOOGL
Alphabet Inc. is a holding company. The Company's segments include Google Services, Google Cloud, and Other Bets. The Google Services segment includes products and services such as ads, Android, Chrome, devices, Google Maps, Google Play, Search, and YouTube. The Google Cloud segment includes infrastructure and platform services, collaboration tools, and other services for enterprise customers. Its Other Bets segment is engaged in the sale of healthcare-related services and Internet services. Its Google Cloud provides enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. Google Cloud Platform provides access to solutions such as artificial intelligence (AI) offerings, including its AI infrastructure, Vertex AI platform, and Gemini for Google Cloud; cybersecurity, and data and analytics. Google Workspace includes cloud-based communication and collaboration tools for enterprises, such as Calendar, Gmail, Docs, Drive, and Meet.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Surge in Trading Volume: Trading volume reached 87.1 million shares, about 136% above the three-month average of 36.8 million shares, reflecting heightened investor interest in the company's future prospects.
- Earnings Beat Expectations: In Q4, Alphabet reported sales and earnings per share growth of 18% and 31%, respectively, surpassing Wall Street's consensus, with Google Search and YouTube showing steady growth rates of 17% and 9% each.
- Cloud Business Highlight: The cloud backlog surged 55% sequentially, more than doubling from Q4 2024, indicating strong demand in the cloud services sector, while management's confidence in AI-related spending continues to grow.
See More
US Stocks Plunge as Tech Sector Leads Decline
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- Weak Labor Market Signals: Challenger's report revealed a staggering 117.8% year-over-year increase in job cuts for January, totaling 108,435, the highest for January since 2009, while initial jobless claims rose by 22,000 to 231,000, highlighting vulnerabilities in the US labor market that could hinder economic recovery.
- Bitcoin Plunge: Bitcoin (^BTCUSD) plummeted over 12% to a 1.25-year low, reflecting deepening negative momentum in the cryptocurrency market, with approximately $2 billion flowing out of Bitcoin ETFs in the past month, signaling a decline in investor confidence.
- Earnings Season Impact: Despite 150 S&P 500 companies set to report earnings this week, market focus on economic data intensifies, with S&P 500 earnings expected to grow by 8.4% in Q4, yet overall market sentiment remains suppressed by recent economic weakness.
See More
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- Underperformance Noted: Despite positive developments in self-driving technology, Tesla is underperforming in 2026, with a 12% decline compared to a 2% drop in the Nasdaq 100, indicating significant market pressure and investor skepticism.
- Safety Monitor Removal Proposal: Investor Gary Black suggests that Tesla should remove safety monitors from its robotaxis to alleviate doubts about its unsupervised self-driving capabilities, which could enhance market confidence in the company's future.
- New Pickup Truck Design: Black emphasizes that launching a new pickup truck that aligns more closely with conventional designs could help Tesla recover its stock performance, projecting that even a 10% market share could add $1.20 per share to earnings, reflecting a 40% increase in 2027 earnings.
- Musk's Stock Purchase: Black also highlights that if CEO Elon Musk were to purchase additional shares, it would send a strong confidence signal to investors, potentially boosting both investor sentiment and Tesla's stock performance.
See More
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- Capex Surge: Amazon forecasts its capital expenditures to exceed $200 billion this year, marking over a 50% increase from last year, yet this announcement led to an over 11% drop in its stock price during after-hours trading despite strong results.
- Industry-Wide Spending: The five largest U.S. tech companies are projected to spend over $630 billion on data centers, AI development, and other capacity-enhancing expenditures, a figure that surpasses the GDP of countries like Singapore or Israel, reflecting strong confidence in future growth but also raising market concerns.
- Market Reaction: The Nasdaq 100 index has already declined by 3.9% this week and is on track for its worst performance since April last year, as investors express doubts about whether high spending will yield future returns, leading to a broad sell-off in tech stocks.
- Analyst Perspectives: Despite the bearish market sentiment, Wall Street analysts overwhelmingly recommend buying into Big Tech stocks, indicating confidence in the sector's long-term prospects, particularly for Amazon and Alphabet, which retail sentiment considers extremely bullish.
See More
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- Strong Earnings Performance: Alphabet's fourth-quarter earnings report exceeded market expectations on both revenue and net income, although investors expressed concerns over its aggressive capital expenditure plans for 2026, which are projected to reach $175 billion to $185 billion, doubling last year's spending.
- Returns on AI Investments: Alphabet's management highlighted the substantial returns from its existing AI investments and plans to increase spending on AI compute to support frontier model development by Google DeepMind, indicating reliance on Nvidia hardware to enhance core business operations.
- Partnership with Nvidia: Alphabet identified Nvidia as a key partner and one of the first to access Nvidia's new Vera Rubin GPU platform, underscoring that despite challenges from companies like Alphabet, hyperscalers remain heavily dependent on Nvidia's hardware.
- Robust AI Market Demand: Following the launch of Gemini Enterprise, Alphabet reported selling 8 million paid seats within four months, with management asserting that AI investments and infrastructure are driving overall revenue and growth to meet customer demand and capitalize on future opportunities.
See More
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- Revenue Growth: Amazon's fourth-quarter net sales reached $213.39 billion, reflecting a 14% year-over-year increase and surpassing Wall Street's expectations of $211.30 billion, indicating robust performance in the e-commerce sector.
- Guidance Outlook: The company guided first-quarter revenue between $173.5 billion and $178.5 billion, roughly in line with consensus estimates, suggesting stability in Amazon's operations in the coming months.
- Massive Investment Plan: CEO Andy Jassy revealed that Amazon plans to invest approximately $200 billion in capital expenditures by 2026, focusing on artificial intelligence infrastructure, custom chips, robotics, and satellite networks, although this has raised concerns in the market.
- Cloud Service Performance: AWS generated $35.6 billion in fourth-quarter revenue, up 24% year-over-year, with operating income rising from $10.6 billion to $12.5 billion, showcasing the strong growth potential of its cloud computing business.
See More
