Amazon Stock Slides After Q3 Earnings Miss Despite AWS Growing 39%

Amazon’s cloud business had its best growth in years, but Wall Street focused on everything else. Shares of Amazon (AMZN) fell more than 6% in extended trading Thursday after the company’s third-quarter revenue and earnings came in below analyst expectations and its free cash flow swung deeply negative because of heavy AI spending, CNBC reported.

How did Amazon earnings compare with estimates?

Here is how Amazon did against estimates from analysts polled by LSEG, according to CNBC:

• Earnings per share: $1.89 vs. $1.96 expected
• Revenue: $201.94 billion vs. $202.31 billion expected

Other key lines, compared with StreetAccount estimates:

• Amazon Web Services: $45.98 billion vs. $45.29 billion expected
• Advertising: $19.64 billion vs. $20.82 billion expected
• Online stores: $68.47 billion vs. $69.68 billion expected

Net income was $20.69 billion, or $1.89 per share, down from $21.19 billion, or $1.95 per share, a year earlier. Amazon said the decline was mainly because last year’s third quarter included a $9.5 billion pre-tax gain from its investment in AI startup Anthropic, CNBC reported.

Why did Amazon stock price drop?

The biggest worry was cash. Amazon posted negative free cash flow for a second straight quarter, with an outflow of $42.4 billion over the trailing 12 months, CNBC reported. The company said the shortfall was mainly due to higher purchases of property and equipment tied to AI investments.

Capital expenditures hit $77.3 billion in the quarter, up from $35.1 billion a year earlier and well above the $58.7 billion analysts expected, according to FactSet data cited by CNBC. Amazon kept its 2026 capex forecast at $220 billion.

Guidance also disappointed. Amazon expects fourth-quarter revenue of $240 billion to $247 billion. The midpoint was below Wall Street’s expectation of $244.5 billion, according to LSEG.

Retail and ads were softer, too. Online store sales grew just 2%, a slowdown from nearly 10% a year earlier, and ad revenue rose 11%. CNBC reported that both were affected in part by Amazon moving Prime Day in several countries from the third quarter into the second, to avoid clashing with the FIFA World Cup in July.

How did AWS do in the Amazon earnings report?

AWS was the bright spot. Revenue rose 39% year over year to $45.98 billion, the unit’s fastest growth since the fourth quarter of 2021, CNBC reported. Operating income climbed 55% to $17.77 billion, beating the $16.97 billion consensus. AWS now makes up almost 23% of Amazon’s revenue, a record.

The quarter also saw AWS acquire data analysis startup DuckLabs and sign deals with Meta and OpenAI, according to the company’s statement as reported by CNBC.

What did Andy Jassy say on the Amazon earnings call?

CEO Andy Jassy struck an upbeat tone about the cloud business. On the call, he said Amazon believes AWS “can grow north of 40% in each of 2027 and in 2028, and be a trillion-dollar revenue business in the next five to 10 years,” CNBC reported.

Other highlights from the call, per CNBC:

• Amazon expects to “spend meaningfully more in 2027” and has a “clear line of sight to attractive financial returns,” Jassy said.
• The company’s chips business “continues to grow triple-digit percentages year over year.”
• Amazon plans to make its Trainium AI chips available outside AWS “late in 2027.”
• He pointed to growing traction for Bedrock, Amazon’s AI model marketplace, and its Graviton chips.

How does Amazon compare with Microsoft and Alphabet?

The report capped a busy week for Big Tech. CNBC noted that Microsoft lowered its 2026 capex forecast to $170 billion from $175 billion, while Alphabet kept its range at $195 billion to $205 billion. Google Cloud revenue more than doubled in the third quarter, and Microsoft’s Azure is now 72% the size of AWS, up from 58% two years ago, CNBC reported.

The takeaway for investors: AWS is accelerating, but the market is weighing that against the cost of Amazon’s AI buildout and slower growth in retail and ads.

This article is for informational purposes only and is not financial advice.

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