Amazon’s Record $42B Cash Burn and $220B AI Spend Plan Trigger Stock Plunge Despite AWS Growth

Key points

• Amazon’s free cash flow swung to a negative $42.4 billion over the past year, nearly double the previous record of $23 billion set in 2022.
• Capital expenditures reached $77.3 billion in the third quarter, more than double the $35.1 billion spent a year earlier, primarily for AI data centers.
• Amazon Web Services (AWS) revenue grew 39% to $46 billion, its fastest pace in nearly five years, with a backlog of $578 billion.
• The company maintained its 2026 capital expenditure forecast at $220 billion and signaled it will 'spend meaningfully more' in 2027.
• Shares fell over 6% after hours as the company missed earnings estimates, with long-term debt rising to $173 billion from $66 billion at the end of 2025.

Background

This development follows a broader tech sector sell-off triggered by hyperscaler cash burn. Earlier this week, Alphabet and Meta also reported significant negative free cash flows due to AI infrastructure spending, leading to a global rout in tech stocks. Amazon’s results are part of a wider market reaction to the scale of capital expenditures outweighing immediate revenue growth.

How outlets are covering it

Analysts are divided on Amazon’s strategy. JPMorgan and Bank of America view the aggressive spending as a necessary investment for long-term growth, citing strong AWS demand and visibility. Conversely, some analysts express caution regarding the free cash flow and rising debt. While JPMorgan’s Doug Anmuth acknowledges near-term pushback, he believes Amazon is building for a larger business. Bank of America’s Justin Post maintains a Buy rating, highlighting strong AI positioning. However, Seeking Alpha analyst Bohdan Kucheriavyi remains cautious due to the debt situation, while Daniel Jones views the stock plunge as a buying opportunity. Morgan Stanley’s Brian Nowak trimmed its price target but kept Amazon as a top pick, citing strong AWS guidance.

Why it matters

Amazon’s record cash burn and massive debt increase signal a shift in how hyperscalers fund AI infrastructure. The company’s decision to borrow heavily rather than issue stock, unlike Meta, has raised concerns about its financial leverage. Credit default swap prices have risen, implying a 7% chance of default over five years. This move could set a precedent for other tech giants facing similar cash flow pressures from AI investments.

What to watch

Amazon expects to spend 'meaningfully more' on capital projects in 2027 than the $220 billion planned for 2026. The company anticipates AWS growth of over 40% in both 2027 and 2028. Investors will watch the re:Invent conference for updates on Trainium chips and AI applications. Amazon also plans to make its Trainium chips available to third-party data centers late in 2027.