Needham analyst Laura Martin left a Buy rating on Amazon (NASDAQ:AMZN) intact and kept a $265 price target on Friday, while pressing concerns about the retailer-cloud giant’s capital expenditure strategy for fiscal 2026.
Martin pointed to the size of Amazon’s proposed capital program as a key factor weighing on the stock, noting the company is seeking nearly $200 billion in spending for fiscal 2026. Her analysis indicates that, in contrast, every other hyperscaler is funding its fiscal 2026 capital expenditure from free cash flow.
Amazon CEO Andy Jassy addressed the level of spending in a shareholder letter published Thursday, defending the company’s approach. Jassy argued that building value is not a straight line and predicted broad change driven by artificial intelligence, writing that "Every customer experience will be reinvented by AI, and there will be a slew of new experiences only possible because of AI." He also said Amazon will continue to support wide-ranging investments across retail, logistics, low Earth satellites, same-day-delivery, pharmacy, perishables, and business supplies.
Martin identified a potential inconsistency in that strategy. She asserted that if AI truly reshapes every customer experience, then capital committed to businesses outside the AI-driven opportunities carries elevated risk and worse risk/reward characteristics. Based on her work, Martin estimates roughly 70% of Amazon’s fiscal 2026 capital expenditures are tied to AI initiatives. Given that allocation, she argues the company should trim the remaining 30% of planned spending until it is clear those businesses will not be materially disrupted by AI.
On returns, Martin set a concrete threshold for AI-related investments. In her estimate, Amazon needs a 20% return on investment from its AI capital expenditures. She said that 20% should become the new minimum hurdle rate for every capital dollar deployed inside the company. Under her view, any planned expenditure expected to yield less than that benchmark should be deferred by two to three years, until generative AI capabilities are more fully developed and their implications for those businesses are clearer.
Martin’s critique frames the debate around allocation and timing of large-scale capital commitments inside a company that operates across cloud infrastructure, retail, logistics and other capital-intensive domains. Her stance keeps a Buy rating in place while urging greater selectivity and higher expected returns on Amazon’s near-term capital program.