Amazon.com (AMZN) is facing growing scrutiny from Wall Street as the e-commerce and cloud computing giant balances strong revenue growth with an ambitious $200 billion capital expenditure plan for 2026. DA Davidson analyst Gil Luria downgraded Amazon stock from “Buy” to “Neutral” and lowered the price target to $175, citing concerns that the company is “scrambling to catch up” in cloud computing and AI relative to rivals like Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT).
About Amazon Stock
Headquartered in Seattle, Amazon operates a broad portfolio spanning e-commerce, cloud computing via Amazon Web Services (AWS), subscription services, digital streaming, advertising, and physical retail. With a market capitalization of roughly $2.2 trillion, AMZN is a key member of the Magnificent Seven stocks driving the tech sector.
Despite its market leadership, Amazon stock has underperformed broader benchmarks. Over the past 52 weeks, shares have declined approximately 10.2%, contrasting with a 14.43% gain in the S&P 500 Index ($SPX). Year-to-date in 2026, AMZN continues to trend lower, down about 9.47%, largely due to investor concerns over heavy capital spending and near-term profitability pressures.
Q4 Earnings and 2025 Performance
Amazon’s fourth-quarter 2025 results, reported on Feb. 5, showed strong top-line growth but raised eyebrows on profitability. Net sales climbed to $213.4 billion, a 14% year-over-year (YOY) increase. AWS revenue reached $35.6 billion, up 24% YOY, marking its fastest growth in over a year. Advertising revenue also rose 22% YOY to $21.3 billion.
Earnings per share (EPS) came in at $1.95, slightly below Street estimates. Investors reacted to the company’s outlook and aggressive spending plans with a stock decline of 4.4% on Feb. 5 and an additional 5.6% on Feb. 6. For the full year 2025, Amazon reported net sales of $716.9 billion with double-digit growth, but free cash flow fell sharply to $11.2 billion due to aggressive capital expenditures.
2026 Guidance and Strategic Spending
Management projects 2026 capital expenditures around $200 billion, targeting AI data centers, robotics, custom silicon, and emerging businesses like low-Earth-orbit satellite initiatives. First-quarter 2026 revenue guidance ranges from $173.5 billion to $178.5 billion, implying YOY growth between 11% and 15%. Analysts expect EPS of $7.72 for 2026 and anticipate $9.27 in 2027, reflecting continued growth despite heavy spending.
While these initiatives support long-term strategic goals, they weigh on near-term profitability and cash flow, contributing to market caution.
Analyst Views on Amazon Stock
DA Davidson’s downgrade reflects concern over Amazon losing leadership in cloud computing. AWS growth of 24% lags behind Google Cloud (48%) and Microsoft Azure (39%), and Amazon lacks a frontier AI lab or a critical OpenAI-style partnership, according to Luria. The analyst warned that heavy investment in AI and cloud could pressure margins further, leaving Amazon Retail less prepared for AI-driven e-commerce.
Despite this cautionary view, overall Wall Street sentiment remains bullish. Among 57 analysts, 49 rate Amazon as a “Strong Buy,” five suggest a “Moderate Buy,” and three maintain a “Hold” rating. The average analyst price target sits at $285.91, implying nearly 40% upside. The most bullish target is $360, suggesting potential gains of over 75%.
Balancing Growth and Risk
Investors face a nuanced scenario with Amazon stock. The company is expanding aggressively into AI and cloud infrastructure, positioning itself for long-term dominance. However, near-term profitability pressures, intense competition, and high capital expenditure commitments have led some analysts to reduce expectations.
For 2026, the Amazon stock outlook will largely depend on AWS’s ability to close the gap with rivals, the effectiveness of AI initiatives across retail and cloud, and the market’s tolerance for high spending in pursuit of strategic growth.
The Bottom Line
Amazon is at a crossroads. While revenue growth remains strong and long-term strategy is ambitious, the stock’s near-term trajectory is clouded by heavy investment and competition. Analysts are split: some see compelling upside for patient investors, while others caution that AMZN is scrambling to keep pace in an increasingly competitive tech landscape.
Investors monitoring Amazon stock in 2026 should weigh the company’s long-term growth potential against short-term margin and cash flow pressures, particularly as AI and cloud competition intensifies.
Featured Image: Unsplash © christianw
