Amazon.com Inc. (AMZN) shares declined 2.3% on Wednesday, closing at $238.59, after the company revealed it had secured a $17.5 billion senior unsecured delayed-draw term loan facility. The move has heightened investor scrutiny of the e-commerce and cloud giant's aggressive capital spending on artificial intelligence (AI) infrastructure, particularly as its free cash flow has deteriorated and debt levels have climbed.
The loan agreement, signed on June 8 with Citibank N.A. as administrative agent, allows Amazon to draw funds at a future date rather than upfront. The facility's commitments are set to expire on September 30, 2026, unless the full amount is borrowed earlier. Any drawn funds will mature three years after the draw date, with interest tied to the base rate or Term SOFR plus a margin ranging from 0.625% to 0.875%, depending on Amazon's credit ratings.
This financing follows a record C$14 billion (approximately $10.04 billion) Canadian-dollar bond sale on Tuesday, which surpassed Alphabet's C$8.5 billion Canadian corporate bond record set last month. The back-to-back debt deals underscore Big Tech's growing reliance on external funding for AI infrastructure build-outs, as companies like Amazon, Alphabet, and Meta accelerate spending in the space.
Amazon's AI investments have been a primary driver of its capital expenditures. In the first quarter of 2026, the company reported trailing 12-month free cash flow of just $1.2 billion, a steep drop from $25.9 billion a year earlier. The decline was largely attributed to a $59.3 billion surge in property and equipment purchases, which Amazon said was "primarily" due to AI investments. The company's debt load has also increased, raising questions about its ability to sustain such spending without straining its balance sheet.
Despite these concerns, Amazon's AWS cloud business remains a bright spot. AWS revenue grew 28% year over year to $37.6 billion in the first quarter, with operating income rising to $14.2 billion from $11.5 billion a year ago. CEO Andy Jassy highlighted the unit's growth, noting that AWS is expanding on "a very large base." Amazon also disclosed that its chips unit, which includes Graviton, Trainium, and Nitro, now generates over $20 billion in annualized revenue. The company has secured fresh AI-driven deals with OpenAI, Anthropic, and Meta.
Investor reaction to the new debt has been muted, with the broader market also under pressure. U.S. stocks declined on Wednesday, with the Nasdaq Composite falling 1.18% and the S&P 500 dropping 0.84%, as concerns about inflation and geopolitical tensions weighed on sentiment. Amazon's stock, which opened at $243.41, hit a low of $237.96 during the session before recovering slightly.
The risk for Amazon is that its massive AI spending may not yield immediate returns. If usage, pricing, or demand for AI services falls short, the company could face higher debt payments and weaker free cash flow. Amazon has flagged interest rates, resource variability, customer demand, AI adoption rates, and the timeline for new infrastructure as key factors that could influence its financial performance.
Looking ahead, Amazon's second-quarter guidance calls for net sales between $194 billion and $199 billion, with operating income in the range of $20 billion to $24 billion, including the impact of Prime Day. The $17.5 billion loan facility adds a deadline to the calendar: the commitments expire on September 30 unless Amazon draws on them. The company plans to use the proceeds for general corporate purposes, but the timing has sharpened focus on whether AWS growth can offset the mounting capital demands.
