As artificial intelligence and infrastructure spending dominate the stock market narrative this year, all eyes are on Amazon (AMZN) ahead of its July 30 earnings report. The question facing investors is stark: will Amazon follow Alphabet’s Google (GOOG, GOOGL) in sharply raising its capital expenditure guidance, and will its stock suffer the same sell-off?
Amazon, Alphabet, Microsoft and Meta have together disclosed plans to spend a combined $700 billion on capital expenditures this year. Amazon is already the biggest spender at $200 billion, with Alphabet close behind at $185 billion. Yet in its second-quarter earnings call, Alphabet lifted its full-year capex forecast from a range of $180–$190 billion to $195–$205 billion, formally joining the $200 billion club. The new spending is earmarked primarily for servers, connectivity, storage and data center memory. Alphabet shares tumbled 6% the following day.
Alphabet CFO Anat Ashkenazi explained that the company has been supply-constrained for several quarters, with extremely strong demand from external cloud customers and across the business. “Our goal is to invest as long as we see an attractive return on that investment,” she said. Despite the accelerated spending, computing capacity is still lagging demand. That came even as Alphabet delivered exceptionally strong results: total revenue of $119.79 billion, up 24% from a year ago, and Google Cloud revenue surging 82% to $24.76 billion. Even so, concerns that mushrooming capex is eating into free cash flow have taken hold of market sentiment.
The likelihood that Amazon will also raise its capex forecast is seen as high. First, Amazon Web Services commands a 28% share of the global cloud market, well ahead of Microsoft’s 21% and Google Cloud’s 14%. As the largest cloud provider, its infrastructure investment needs are even more pressing. Second, Amazon management has already telegraphed unwavering conviction. In his April shareholder letter, CEO Andy Jassy made clear the company is not spending roughly $200 billion on a hunch. He pointed to customer commitments, including an OpenAI deal exceeding $100 billion, and noted that a substantial portion of AWS capex expected in 2026 is already backed by customer agreements, with much of it set to be monetized in 2027 and 2028. Third, industry signals point to accelerating investment. BNP Paribas analysts recently projected that Microsoft, the No. 2 cloud player, could spend as much as $262 billion in capital expenditures in its fiscal 2027, having already laid out $104.3 billion in the first three quarters of fiscal 2026.
While the demand logic appears clear, the market’s short-term reaction to any capex bump is likely to be negative. Investors are fixated on the pressure that enormous outlays are placing on free cash flow and remain skeptical about whether these sums can ultimately be turned into profit. Jassy’s argument, however, stresses that Amazon is not spending blindly. As long as the investments are underwritten by customer commitments and genuine demand, the company could emerge as a long-term winner. History shows that Amazon tends to come out much stronger after big investment cycles. Should the stock dip after earnings, it could open an attractive window for patient capital.
That judgment is supported by specific business developments. AWS’s second-quarter revenue growth is expected to show greater sustainability, fueled by partnerships with Anthropic and OpenAI as well as a growing custom chip business. In e-commerce, Amazon’s Prime Day event in June was robust, with Adobe and Retail Drive reporting that U.S. online sales jumped more than 9% year over year. Because the event shifted from the third quarter to the second, it will provide an additional lift to the quarter’s sales. More tellingly, Amazon has deployed over one million robots across its fulfillment centers, orchestrated by deeply integrated AI models. As a result, the e-commerce segment is capturing significant operating leverage, with profit growth consistently outpacing revenue growth.
On valuation, Amazon trades at less than 25 times forward earnings based on 2027 analyst estimates — a historically low multiple and a steep discount to brick-and-mortar rivals Costco and Walmart, which command forward P/Es above 37. That valuation provides a measure of safety ahead of the earnings test. The market is now holding its breath: will Amazon retrace Google’s steps, or will solid customer commitments and accelerating cloud growth chart a path the market finds more reassuring?
