Amazon (NASDAQ:AMZN) shares traded lower in pre-market action on Thursday as the company's massive capital expenditure program consumed virtually all of its operating cash flow. The e-commerce and cloud computing giant allocated 99% of its trailing operating cash flow toward net capital expenditures, a figure that has investors focusing on cash conversion as a key metric.
According to the company's latest financial filings, Amazon's operating cash flow rose 30% to $148.5 billion over the trailing twelve months ended March 2026. However, capital expenditures for property and equipment surged 67% to $147.3 billion, leaving free cash flow at just $1.2 billion—a staggering 95% decline from $25.9 billion in the prior period. The free cash flow conversion rate fell to 0.8% from 22.8% a year earlier.
The spending spree is largely driven by Amazon's commitment to artificial intelligence. The company has allocated roughly $200 billion for capital spending through 2026, with much of that directed toward AI infrastructure. On Wednesday, Amazon announced job cuts in its artificial general intelligence division, though it did not disclose the number of roles affected. The move signals a sharper focus on AI investments that can generate returns, rather than pure research.
Amazon shares were seen at $240.16 as of 7:02 a.m. EDT, down 1.9% from Wednesday's close of $244.85. The stock has declined 2% over the past five sessions but remains up 6.1% year-to-date. Trading on the Nasdaq is scheduled to begin at 9:30 a.m.
The cash crunch is evident across the company's financials. While operating cash flow increased by $34.6 billion year-over-year, the $59.3 billion rise in capital spending more than offset those gains. Amazon reported that the surge in spending was primarily due to investments in artificial intelligence. The savings from the job cuts announced Wednesday were not disclosed, making it difficult to assess their impact on overall capital expenditure.
Reuters reported Thursday that founder Jeff Bezos is directing an AI-driven overhaul of Prime Video, known internally as Lighthouse. The streaming platform has over 200 million users. Amazon did not comment on the report. The actions point to a stricter AI focus, with research positions reduced and an emphasis shifting to client-oriented distribution, though Amazon has not confirmed this approach.
AWS continues to anchor Amazon's earnings. First-quarter revenue increased 28% to $37.6 billion, with the segment generating $14.2 billion in operating income, accounting for 59% of Amazon's total operating profit. However, the broader cloud landscape is becoming more competitive. Alphabet (NASDAQ:GOOGL) reported challenging results for its peers on Wednesday, with Google Cloud revenue surging 82% to $24.8 billion. Despite that growth, Alphabet shares dropped roughly 3% after the company raised its 2026 capital expenditure outlook. The quarter resulted in negative free cash flow of $5.9 billion. "The demand still outpaces that investment," finance chief Anat Ashkenazi said, according to Reuters.
David Russell, strategist at TradeStation, stated the issue directly: "Companies exist to make money, not spend money." Reuters analysis indicates that by 2027, five major cloud companies may see their capital expenditure outpace free cash flow.
Amazon is set to announce its Q2 earnings on July 30 at 5 p.m. EDT. The company projects revenue between $194 billion and $199 billion, with expected operating income ranging from $20 billion to $24 billion. These projections assume that Prime Day took place within the quarter. Investors are watching to see if cash flow can begin to surpass capital expenditures in the coming week.
Risks to the outlook include potential decelerating growth at AWS, AI capacity that may not ramp up as quickly as expected, and retail margins vulnerable to shipping expenses, currency fluctuations, and softening demand.
