Following Amazon’s fourth-quarter earnings report, the stock experienced a severe sell-off, trading roughly 23% below its all-time highs at just 25.8 times this year’s earnings estimates, close to its lowest valuation in the modern era.

Revenue beat expectations in the fourth quarter, but Amazon’s $200 billion 2026 capital spending forecast caused investor concern. Amazon made $139.5 billion in operating cash flow in 2025, up 17% from the prior year.

AWS CEO Matt Garman reassured investors in an interview, stating that despite the massive spending, AWS expects to be capacity-constrained for the next couple of years.

Amazon’s past investment strategies have paid off, with its e-commerce division now profitable and AWS becoming even larger in terms of profit.

Garman believes that Amazon will still be undersupplied after spending $200 billion on AI computing power, allowing the company to charge adequate prices for its services.

AWS saw year-over-year revenue growth accelerate from 20% in Q3 to 24% in Q4. The massive investments scheduled for 2026 are expected to yield results in 2027 and beyond, leading to an acceleration in revenue and profits.

Long-term investors should view Amazon’s current spending as a positive sign for future returns, despite any short-term fluctuations in stock performance.

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*Stock Advisor returns as of February 16, 2026. Billy Duberstein and/or his clients have positions in Amazon and Microsoft. The Motley Fool has positions in and recommends Amazon, Microsoft, and Oracle.

Read more at Yahoo Finance: AWS Chief Matt Garman Just Delivered Wonderful News for Amazon Shareholders