E632: Amazon’s Stock Is Cratering – Here’s What Happened

Amazon’s shares plunged nearly 10% after its latest earnings release, even though revenue beat expectations and AWS posted a record‑high 24% growth. Investors are uneasy about the company’s capital‑spending outlook, with guidance now pointing to roughly $200 billion in 2026—well above the $150 billion analysts had forecast. The bulk of this increase is earmarked for artificial‑intelligence initiatives, prompting questions about the timing and return on investment for such a massive outlay. This tension between solid top‑line performance and aggressive AI spending is the primary driver of the stock’s recent volatility.

On the e‑commerce front, Amazon delivered an impressive 8% growth in Q4, matching its strong Q3 and Q2 momentum and marking one of the highest post‑COVID rates in its history. Third‑party seller services and FBA fees rose 10%, while advertising revenue surged 22% year‑over‑year, outpacing rivals like Meta and Google. These figures highlight Amazon’s dual engine of marketplace expansion and ad‑tech dominance, reinforcing its position as a critical platform for brands seeking both sales volume and high‑impact advertising.

Strategically, Amazon is reshaping its retail footprint: it shuttered dozens of Amazon Fresh and Go locations to double‑down on same‑day grocery delivery, now available in over 2,300 U.S. cities. The company also expanded pharmacy delivery and introduced AI‑driven tools such as the Rufus shopping assistant, while restricting external AI agents to protect ad revenue. Meanwhile, the Amazon Hall initiative targets low‑cost goods markets abroad, though adoption remains limited. Together, these moves signal a shift from brick‑and‑mortar experiments toward a technology‑centric, logistics‑heavy model aimed at sustaining growth amid mounting competitive pressures.