Amazon shares tumble 9.8% on $200 billion capex guidance
The tech giant’s fiscal 2026 capital expenditure forecast exceeded market expectations, triggering a sharp sell-off even as the firm’s competitive moat in e-commerce and artificial intelligence infrastructure remains intact.
Amazon shares fell 9.8% in the first quarter of 2026 after the company projected $200 billion in capital expenditures for the fiscal year, a figure that surpassed Wall Street consensus. The decline followed a strong fourth-quarter fiscal 2025 performance, where the company reported $213.4 billion in revenue and $25 billion in operating income, driving a 31.9% surge in share price over a single month. However, the heavy investment guidance has reignited concerns regarding the impact on near-term profitability.
Baron Capital, in its first-quarter 2026 investor letter for the Baron Durable Advantage Fund, cited the capital expenditure guidance as a primary factor in the share price drop. The firm noted that while investors are wary of the sizable incremental investments, Amazon remains the world’s largest retailer and cloud services provider. The letter highlighted that the company continues to expand operating margins across core North American retail, Amazon Web Services (AWS), and international retail, driven by improved cost discipline and operational efficiencies.
Despite the quarterly decline, Amazon’s long-term fundamentals appear robust. Baron Capital pointed out that the company has less than 15% penetration of its total addressable market in e-commerce, leaving substantial room for growth. The firm expects AWS revenue growth to accelerate meaningfully over the next two years, particularly as leading artificial intelligence companies increase their usage of AWS infrastructure. Amazon’s full-stack approach, spanning silicon, systems, software, and the developer ecosystem, continues to widen its competitive moat in the cloud infrastructure market.
The broader market environment in the first quarter of 2026 was complicated by geopolitical tensions and a subsequent war with Iran, which drove up oil prices and adversely affected market dynamics. Baron Capital reported that its Institutional Shares declined 9.0%, underperforming the 4.3% decline of the S&P 500 Index. The firm attributed two-thirds of its relative underperformance to sector allocation and one-third to poor stock selection, though it maintained Amazon as a key holding due to its durable structural advantages.
At the time of reporting, Amazon shares closed at $270.13 on May 13, 2026, reflecting a one-month return of 8.18% and a 52-week gain of 31.66%. The company’s market capitalisation stood at $2.91 trillion. Institutional interest remains high, with 381 hedge fund portfolios holding Amazon shares at the end of the fourth quarter, an increase from 332 in the previous quarter. While Baron Capital acknowledged the potential of Amazon as an investment, it noted that certain other artificial intelligence stocks may offer greater upside potential with less downside risk in the current climate.
