Amazon's $220B Capital Plan Squeezes Cash Flow

Amazon's massive capital expenditure plan for 2026 is putting pressure on its cash flow and profits. The company plans to spend around $220 billion in cash, which is roughly twice its operating income of $27.5 billion in the same quarter.

The majority of this spending goes towards Amazon Web Services (AWS) and generative AI initiatives. However, the cost of memory components has increased significantly, pushing up the capital plan by about $20 billion to reach the current estimate of $220 billion.

Data centers have a useful life of 30-40 years, while servers last for at least five to six years before they need replacement. This means that Amazon's free cash flow will be affected until these data centers come online and can start generating revenue.

AWS revenue grew by 36.7% year-over-year in the second quarter of 2026, with a backlog of $496 billion. However, investors are waiting for Amazon to pay back its capital expenditures before seeing any significant returns.