Moody's changes Amazon's outlook to stable due to increased AI infrastructure spending

2026-02-20 23:35:23

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Investing.com - Moody’s has revised Amazon’s (NASDAQ:AMZN) outlook from positive to stable, marking a shift in the e-commerce giant’s credit trajectory. The credit rating agency also confirmed Amazon’s A1 senior unsecured bond rating, citing the company’s dominant market position and strong brand assets.

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This adjustment comes after Amazon made a strategic decision to increase capital expenditures by over 50% to approximately $200 billion to strengthen its technological infrastructure. This large-scale investment cycle aims to support the rapid expansion of Amazon Web Services (AWS) and the growing demand for artificial intelligence.

Moody’s noted that such aggressive spending may exceed the company’s internal cash generation capabilities in the foreseeable future. The agency stated, “We expect these investments will require Amazon to utilize external financing sources, as we forecast its cash flow generation will not fully support this level of expenditure.”

Despite the substantial capital needs, Amazon’s operational metrics remain strong, benefiting from significant improvements in regionalized fulfillment and delivery efficiency. Analysts emphasize that the company’s Prime-1 commercial paper rating reflects its history of maintaining high cash balances across various investment cycles.

The cloud computing division remains the primary growth engine, although it faces increasingly fierce competition from other capital-rich tech companies building AI capabilities. Moody’s pointed out in its rating rationale, “As investment spending increases significantly to meet demand, AWS is expected to grow rapidly from cloud adoption and AI development.”

Looking ahead, an upgrade in rating will require sustained profit growth and positive free cash flow, which are currently under pressure from the current scale of investments. Presently, the stable outlook assumes Amazon will maintain its conservative financial strategy and keep a robust cash-to-debt ratio.

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