Amazon Stock Drops 10% as $200 Billion AI Spend Raises Fears: Are More Layoffs Coming?

Amazon shares slid about 10% in extended trading after the company posted mixed fourth quarter earnings and unveiled a sharply higher spending forecast, rattling investors and renewing anxiety among staff following recent job cuts.

While revenue topped expectations, a narrow earnings miss and a surprise $200 billion (£147 billion) capital expenditure plan focused on artificial intelligence and cloud infrastructure raised fresh questions about margins, cash flow and what the strategy could mean for Amazon's workforce.

What Triggered the Amazon Stock Drop

As reported by Business Wire, the sell off followed Amazon's earnings release, which showed earnings per share of $1.95 (£1.44), just below analyst estimates, alongside revenue of $213.39 billion (£157.53 billion), which exceeded forecasts. Markets focused less on the top line beat and more on the scale of planned investment. Investors reacted to the risk that heavy capital spending could pressure near term profitability, sending Amazon stock lower in after hours trading.

For the current quarter, Amazon forecast sales of between $173.5 billion and $178.5 billion (£128.07 billion to £131.76 billion), broadly in line with expectations. Even so, the guidance did little to calm nerves about costs at a time when tech stocks are under scrutiny for their spending on artificial intelligence.

$200 Billion AI and Infrastructure Spending Explained

Amazon said it expects capital expenditure to reach $200 billion in 2026, far above analyst expectations of around $146.6 billion (£108.2 billion). The company is investing heavily in data centres, chips, robotics and other infrastructure to meet growing demand for AI and cloud services.

'With such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low earth orbit satellites, we expect to invest about $200 billion in capital expenditures across Amazon in 2026, and anticipate strong long-term return on invested capital,' Chief executive Andy Jassy said. He also added that the demand for AWS and AI workloads remains strong and that Amazon is monetising new capacity as fast as it can install it.

The spending surge puts Amazon alongside other tech giants ramping up AI investment. Alphabet has signalled spending of up to $185 billion (£136 billion) in 2026, while Meta expects capital expenditure to rise sharply. The scale of Amazon's plan, however, stood out to investors as unusually aggressive.

AWS Growth Strong But Competition Intensifies

Amazon Web Services reported quarterly revenue of $35.58 billion (£26.26 billion), beating expectations, with growth of 24%, the fastest in more than three years. The cloud unit remains a key driver of Amazon's profitability and a central pillar of its AI strategy.

Even so, competition is intensifying. Microsoft Azure and Google Cloud both reported faster growth in recent quarters, underscoring the pressure on Amazon to defend its market leadership. The push to expand AI capacity is intended to keep AWS competitive, but it comes at a significant cost.

Recent Amazon Layoffs Add to Staff Anxiety

The earnings update landed just weeks after Amazon confirmed layoffs affecting about 16,000 corporate employees, following earlier job cuts in late 2025. The company has been trimming roles as it seeks to streamline operations after rapid expansion during the pandemic years. Amazon had about 1.57 million employees globally at the end of December, the vast majority in its warehouse network.

Amazon has not linked the layoffs to its AI spending plans. However, the timing of job cuts alongside a vast investment push has heightened concern among workers about whether further restructuring could follow as the company prioritises capital intensive projects.

What Amazon Has Said About Jobs and Investment

Executives have framed the strategy as a long-term bet on growth areas such as artificial intelligence, cloud computing and automation. Jassy has said demand for AWS continues to exceed expectations and that investment is needed to avoid capacity constraints. The company has also said it remains focused on improving efficiency across the business.

For employees, the focus will be on whether Amazon's cost discipline in corporate roles continues as capital spending rises. Investors, meanwhile, will be watching how quickly the company can translate its AI and cloud investment into sustainable returns without further unsettling markets.