Amazon AI spending overshadowed a strong cloud quarter after the company missed third-quarter earnings and revenue estimates and shares fell in late trading. The stock plunged more than 6% in extended trading Thursday, according to CNBC’s earnings write-up, while SiliconANGLE’s recap put the drop at more than 7%. Revenue rose 12% to $201.94 billion, short of the $202.31 billion LSEG consensus.
Key Takeaways
- Amazon missed Q3 earnings and revenue; shares fell more than 6%.
- Trailing free cash flow was a $42.4 billion outflow on AI spend.
- AWS revenue grew 39% to $45.98 billion, ahead of estimates.
- Amazon held 2026 capex at $220 billion and flagged higher 2027 spend.
Amazon AI Spending Drains Free Cash Flow
The cash strain is what investors seized on. CNBC reported negative free cash flow of $42.4 billion for the trailing 12 months, a 386% year-over-year swing and the second straight quarter in the red, after a $7.6 billion outflow in the prior quarter. Amazon tied the shortfall mainly to property and equipment bought for AI.
Quarterly capital spending hit $77.3 billion, up from $35.1 billion a year earlier and above the $58.7 billion FactSet estimate cited by CNBC. Chief Financial Officer Brian Olsavsky reiterated a $220 billion capex forecast for 2026. Chief Executive Andy Jassy said Amazon expects to “spend meaningfully more in 2027,” with a “clear line of sight to attractive financial returns.”
Analysis for finance leads: a vendor raising infrastructure spend while free cash flow is negative is signaling that access, not sticker price, may set the next contract. Renewing firms should treat that as a contract issue, not a budget to copy.
Third-Quarter Results Versus Estimates
Operating income, which excludes investment gains and losses, was $28.1 billion, above a $26.2 billion Street forecast, SiliconANGLE reported. Net income was $20.69 billion, or $1.89 a share, versus $21.19 billion, or $1.95 a share, a year earlier. Both outlets said the decline was driven mainly by a $9.5 billion pretax Anthropic gain booked in the 2025 third quarter. Figures below compare reported results with the estimates those outlets cited.
| Metric | Result | Estimate |
|---|---|---|
| Earnings per share | $1.89 | $1.96 |
| Revenue | $201.94 billion | $202.31 billion |
| AWS revenue | $45.98 billion | $45.29 billion |
| Advertising revenue | $19.64 billion | $20.82 billion |
| Quarterly capex | $77.3 billion | $58.7 billion |
| Operating income | $28.1 billion | $26.2 billion |
Fourth-quarter guidance of $240 billion to $247 billion also weighed on the stock. The midpoint was below LSEG’s $244.5 billion estimate for what is usually Amazon’s biggest quarter, lifted by holiday retail.
AWS Growth Outruns Retail and Ads
Amazon Web Services was the offset. Sales rose 39% to $45.98 billion, ahead of StreetAccount’s $45.29 billion estimate and an expected 38% growth rate. Jassy said he expects growth of “over 40%” next year and in 2028.
“Our AWS investment in functionality and infrastructure is working,” he said. He also said he expects AWS to be a $1 trillion revenue business in the next five to 10 years.
He pointed to Bedrock, Amazon’s AI model marketplace, and to Trainium and Graviton chips. The chips business “continues to grow triple-digit percentages year over year,” he said, and Trainium is slated for external customers “late in 2027.”
Forrester analyst Tracy Woo told SiliconANGLE that AWS still drove strong profitability while Amazon spent significantly more capital than Google or Microsoft. “That investment profile suggests Amazon sees future capacity constraints rather than demand constraints,” she said. “AWS’s margin performance suggests customers are currently prioritizing access to these scarce resources over cost optimization.”
Retail and ads lagged. Online sales rose 2% to $68.47 billion, missing a $69.68 billion StreetAccount estimate and slowing from nearly 10% a year earlier. Advertising rose 11% to $19.64 billion, versus $20.82 billion expected. Jassy tied both misses partly to moving Prime Day in several countries into the second quarter to avoid the July FIFA World Cup.
What the Capex Race Means for Smaller Buyers
Peers are not on the same path. Microsoft cut its capex forecast to $170 billion from $175 billion, while Alphabet held guidance at $195 billion to $205 billion. Amazon left $220 billion for 2026 unchanged. Smaller buyers can use the quarter this way:
- Ask cloud vendors about GPU and model access before negotiating price.
- Put late 2027 on the calendar if Trainium supply matters to your stack.
- Do not read a soft retail quarter as a sign that AWS capacity is loosening.
Analysis: vendors are still building faster than they return cash, so access may matter more than discount on the next renewal. Readers tracking the wider economy can compare this with how third-quarter GDP rose on spending and AI, and with Goldman Sachs’ small-business AI institute.
