Amazon’s Capital Expenditures and Financial Outlook
Amazon (NASDAQ: AMZN) plans to increase its capital expenditures to $220 billion for 2026, up from $132 billion in 2025. This surge in spending is largely driven by the rising costs of memory chips amid a significant shortage. Consequently, Amazon’s long-term debt has skyrocketed by 96% over the past year to nearly $129 billion, raising concerns among investors regarding the company’s financial stability.
Despite a 20% net sales growth and a 37% increase in its cloud computing segment, Amazon’s free cash flow has plunged to -$7.6 billion over the trailing 12 months, a sharp decline from $18.2 billion in the previous years. As a result, its forward price-to-earnings (P/E) ratio has fallen to 22, marking a substantial drop in valuation and sparking hesitation among potential investors.
While Amazon maintains a liquidity position of approximately $123 billion, its aggressive capex and growing debt raise questions about the sustainability of its investments. The performance of Amazon in the coming quarters will be crucial in determining whether its high expenditures will yield significant returns.
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