• by Sarah Mahoney , Yesterday

While the revelation that it intends to spend $200 billion to shore up its AI capabilities was a curveball few saw coming, Amazon’s latest results show the company firing on all pistons, with consumer spending still holding up. Fourth-quarter sales climbed 14% to $213.4 billion, up from $187.8 billion a year earlier and ahead of analyst forecasts. In North America, where there have been growing signs of consumer pullback,  sales still notched a healthy 10% year-over-year gain to $127.1 billion.

The company’s advertising business continued its rapid ascent, jumping 22% in the quarter to $21.32 billion. Revenue at AWS, Amazon’s cloud computing division, rose 24% to $35.6 billion, marking its fastest growth in more than three years.

Operating income advanced to $25 billion for the quarter, compared with $21.2 billion a year earlier, though it came in slightly below Wall Street expectations.

The real surprise came with the scale of Amazon’s investment ambitions. The company said it plans to pour $200 billion into capital expenditures, a level of spending it described as necessary given “such strong demand for our existing offerings and seminal opportunities like AI, chips, robotics, and low-earth orbit satellites,” said president and CEO Andy Jassy in the announcement. Amazon’s bombshell followed Google’s disclosure just a day earlier that it would spend up to $175 billion on AI investments. The spending spree is rattling markets and intensifying questions about when — or even whether — such massive bets will ultimately pay off.

Some analysts, however, are urging patience.

Investors “will likely need to see more tangible returns before regaining comfort,” writes Scott Devitt, who covers Amazon for Wedbush. “In our view, the significance of the planned level of spend is consistent with management’s longer-term positioning.”

“Consumer spending is tracking recent-quarter trends, as the expansion of grocery and same-day delivery is spurring demand,” writes Dan Romanoff of Morningstar. “All segments were slightly ahead versus our model, with physical stores in line and AWS more than $1 billion better than anticipated. We do not see any areas of concern with demand and believe results support our positive long-term view on Amazon.”

The earnings report arrives alongside continued workforce reductions. Last week, the company confirmed it would lay off roughly 16,000 employees, following reports that an internal email had prematurely alerted staff to the cuts. That follows a reduction of about 14,000 jobs announced in October.

While consumers are unlikely to see much direct evidence of Amazon’s behind-the-scenes AI investment anytime soon, they will get a more playful glimpse of how the company is thinking about the technology. A Super Bowl spot promoting Alexa+ leans into dark humor, with actor Chris Hemsworth, best known for playing Marvel’s Thor, fending off the voice assistant’s murderous instincts.