Amazon’s recent quarterly update sparked a sell-off in its shares, with the company’s stock plummeting 6% on Friday. However, a closer look at the data suggests that this market overreaction will be short-lived.
Firstly, Amazon’s earnings per share (EPS) missed Wall Street’s estimate by $0.02, but special charges reduced operating income by $2.4 billion, lowering EPS by around $0.22. Moreover, revenue of $213.4 billion easily beat the estimated $211.3 billion. Analysts were expecting capital expenditures of $147 billion in 2026, but Amazon’s forecast of $200 billion is a significant increase.
The main reason for this surge in spending, according to CEO Andy Jassy, is the high demand for its cloud services, particularly AWS. The company expects to monetize capacity as fast as it installs it and has a proven track record of delivering strong returns on invested capital.
Amazon’s business remains strong across various fronts. Revenue jumped 14% year over year in Q4, with earnings rising 6%. AWS’ momentum accelerated, with revenue soaring 24% year over year. The cloud service unit’s backlog is now $244 billion, up 40% year over year and 22% from the previous quarter.
Amazon has become an advertising juggernaut, with ad revenue increasing 22% year over year in Q4 to $21.3 billion. The company’s e-commerce business continues to accelerate its deliveries, boosting customers’ shopping frequency.
Investors should not be swayed by short-term sell-offs and instead focus on Amazon’s long-term moats. Its low-price structure and huge scale of operations create a wide moat that will ensure the company’s continued success in the long run.
Source: https://www.fool.com/investing/2026/02/09/prediction-amazons-sell-off-will-set-up-a-monster