Amazon's Debt Spiral Reaches Critical Mass: What It Means for Shareholders

Amazon's borrowing spree has reached new heights, with the company taking on nearly $92 billion in bonds this year alone. This massive influx of debt is aimed at funding a whopping $220 billion capital expenditure budget, which has led to a significant compression of free cash flow.

In 2024, Amazon's free cash flow stood at $32.9 billion, but by 2025, it had plummeted to just $7.7 billion. This decline is largely due to the company's heavy investments in infrastructure, with capital expenditures reaching $131.8 billion and consuming a staggering 94.5% of operating cash flow.

The ECB has sounded a warning bell on hyperscaler borrowing, citing concerns that it may crowd out other issuers. With Amazon leading all hyperscalers in 2026 bond issuance, investors are right to be cautious about the company's debt trajectory and its potential impact on margins.

As AWS continues to grow at an impressive 37% year-over-year rate, shareholders should keep a close eye on interest expense and depreciation. If these costs continue to rise, they may erode the very margins that make AWS growth valuable in the first place.