Amazon (AMZN) Stock Slides as Bank of America Lowers Target to $275

TLDR

Table of Contents

Amazon shares dropped 9% following Q4 earnings as the company announced plans to spend $200 billion on capital expenditures in 2026.
The e-commerce giant missed EPS estimates at $1.95 versus $1.96 expected but beat revenue forecasts with $213.4 billion.
AWS growth accelerated to 24%, surpassing Wall Street’s 22% estimate, with a backlog growing 40% faster than revenue.
Bank of America reduced its price target from $286 to $275 while maintaining a Buy rating on the stock.
The massive capex increase raises concerns as major AWS customers Anthropic and OpenAI remain unprofitable.

Amazon delivered mixed fourth-quarter results on February 5 that sparked a sharp selloff the next day. Shares fell nearly 9% as investors digested the company’s unprecedented spending forecast.

Amazon.com, Inc., AMZN

The company reported earnings per share of $1.95, falling short of the $1.96 consensus estimate. Revenue painted a brighter picture at $213.4 billion, climbing 13.6% year-over-year and beating forecasts by $2.17 billion.

AWS delivered strong performance with revenue growth accelerating to 24%. That topped Wall Street’s 22% projection and showed continued momentum in the cloud business.

Massive Capex Plan Rattles Investors

CEO Andy Jassy revealed plans to invest approximately $200 billion in capital expenditures during 2026. The figure represents a jump of more than 50% from the nearly $130 billion spent in 2025.

Analysts had anticipated around $150 billion in spending. The $50 billion gap caught the market by surprise.

Amazon closed 2025 with $90.1 billion in cash and equivalents. Full-year net income reached $77.7 billion, up 31% from the prior year. The company carries $68.8 billion in long-term debt.

To fund the $200 billion plan, Amazon will likely need to raise additional debt. Most funds will flow toward AWS infrastructure and custom AI chip development.

The company guided first-quarter revenue between $173.5 billion and $178.5 billion. The midpoint slightly exceeded analyst expectations. However, margin forecasts came in weaker than hoped.

Wall Street Adjusts Expectations

Bank of America analyst Justin Post trimmed his price target to $275 from $286 but kept his Buy rating intact. The adjustment reflects margin uncertainty and broader sector multiple compression.

Post’s revised target still points to roughly 31% upside potential. He values AWS at 8x 2027 sales in his analysis.

The analyst defended the spending strategy. Amazon faces intense competition from Microsoft and Google in cloud services and AI infrastructure.

Management sees AI as an exceptional growth opportunity. The company believes customers will migrate more data to the cloud to access AI capabilities.

Amazon launched Project Rainier in October 2025, featuring 500,000 Trainium2 AI chips. The massive compute cluster supports Anthropic’s AI model training. Jassy said the chip count will continue growing.

The company’s backlog reached $244 billion. A substantial portion likely comes from Anthropic and OpenAI commitments.

Both AI companies remain unprofitable. If they struggle financially, Amazon could face challenges utilizing the capacity built for them.

Amazon released Trainium3 chips in December 2025. The new processors deliver 40% better price performance than Trainium2. Jassy expects nearly all Trainium3 supply committed by mid-2026, with Trainium4 already in development.

Scotiabank also lowered its target to $275 from $300 while keeping a Sector Outperform rating. The firm pointed to weak EBIT results and poor international margins.

The Wall Street consensus remains bullish overall. Of 43 analysts covering the stock, 38 rate it a Buy and 5 assign a Hold. The average price target sits at $283.43, implying 35% upside.

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