- Amazon missed on both lines. It earned $1.89 a share on revenue of $201.94 billion, versus LSEG estimates of $1.96 and $202.31 billion, and the stock fell more than 6% in extended trading Thursday.
- AI spending is eating cash. Third-quarter capital expenditures hit $77.3 billion, up from $35.1 billion a year earlier and above the $58.7 billion FactSet consensus, leaving trailing 12-month free cash flow at negative $42.4 billion versus negative $7.6 billion last quarter.
- AWS was the bright spot. Cloud revenue rose 39% to $45.98 billion, beating the $45.29 billion estimate and marking its fastest growth since the fourth quarter of 2021, while AWS operating income climbed 55% to $17.77 billion.
- The rest of the business lagged. Advertising revenue rose 11% to $19.64 billion versus $20.82 billion expected, online stores grew 2% to $68.47 billion against a $69.68 billion estimate, and the fourth-quarter revenue guide of $240 billion to $247 billion has a midpoint below the $244.5 billion consensus.
What Happened?
Amazon reported third-quarter results after the bell Thursday and kept its 2026 capital spending plan unchanged at $220 billion. Net income came in at $20.69 billion versus $21.19 billion a year earlier, a decline the company tied mainly to a $9.5 billion pre-tax gain on its Anthropic investment in the year-ago quarter. Retail and advertising were also hit by Amazon moving its Prime Day sale into the second quarter in several countries to avoid clashing with the FIFA World Cup. CEO Andy Jassy said the company expects to “spend meaningfully more in 2027.”
Why It Matters?
The report sharpens Wall Street’s central question for big tech: when does record AI spending pay off? Amazon posted negative free cash flow for a second straight quarter, while peers are moving the other way on budgets, with Microsoft trimming its capex forecast to $170 billion from $175 billion and Alphabet holding its $195 billion to $205 billion range. AWS, roughly 23% of Amazon’s revenue, remains the main return story, and competition is tightening, with Microsoft’s Azure now 72% the size of AWS, up from 58% two years ago.
What’s Next?
Jassy said AWS can grow “north of 40%” in each of 2027 and 2028 and become a $1 trillion revenue business in the next five to 10 years, and Amazon plans to sell its Trainium AI chips outside AWS starting late in 2027. Investors will watch whether that cloud acceleration can offset the cash burn, with CNBC noting the stock was already about 16% below its high before Friday’s session.
