Amazon Shares fell more than 6% in after-hours trading Thursday after the company reported disappointing third-quarter results and negative free cash flow, reflecting increased AI spending.
Here’s how the company performed compared to the expectations of analysts surveyed by LSEG:
Earnings per share: $1.89 vs. $1.96 estimated Revenue: $201.94 billion vs. $202.31 billion estimated
Wall Street was also focused on other important earnings numbers.
Amazon Web Services: $45.98 billion vs. $45.29 billion (via StreetAccount) Advertising: $19.64 billion vs. $20.82 billion (via StreetAccount)
The company maintained its 2026 capital spending outlook and said it continues to expect capital spending to reach $220 billion this year.
Tech hyperscalers are ramping up spending to meet surging demand for artificial intelligence infrastructure, but there are signs that capital spending splurges are easing. Earlier this week, microsoft The company lowered its capital spending outlook for this year from $175 billion to $170 billion. alphabet The outlook remains unchanged at $195 billion to $205 billion.
Chief Executive Officer Andy Jassy said on a conference call with investors that the company expects “meaningful spending growth in 2027” and that Amazon has “a clear outlook for attractive financial returns.”
Aggressive AI investment is eating into Amazon’s cash flow. The company had negative free cash flow for the second straight quarter, with outflows of $42.4 billion in the trailing 12 months, an increase of 386% year-over-year. Last quarter, the company reported negative free cash flow of $7.6 billion.
The company said the shortfall was primarily due to increased purchases of real estate and equipment from AI investments.
Capital spending reached $77.3 billion in the quarter, up from $35.1 billion a year earlier and well above analysts’ expectations of $58.7 billion, according to FactSet.
Amazon said it expects fourth-quarter sales to be in the range of $240 billion to $247 billion. The midpoint of the guidance was below Wall Street’s expectations of $244.5 billion, LSEG said. The fourth quarter is typically one of Amazon’s highest revenue quarters due to the peak holiday shopping season.
Amazon’s cloud division’s revenue rose 39% year over year to $45.98 billion. This beat consensus estimates of $45.29 billion and 38% growth, according to Street accounts.
Jassy highlighted the acceleration of AWS in the earnings call, saying the company expects revenue growth of “more than 40%” next year and in 2028, adding that “our investments in AWS in capabilities and infrastructure are paying off.”
Jassy told investors on a conference call that he expects AWS to become a $1 trillion revenue business over the next five to 10 years.
Amazon faces pressure from Wall Street to show that its AI investments are boosting profits. The company noted that its AI model market, Bedrock, is gaining traction, along with its Trainium and Graviton AI chips.
Jassy said Amazon’s chip business “continues to experience triple-digit year-over-year growth.” He added that the company plans to make Trainium chips available externally in “late 2027,” adding that Jassy set a deadline on comments earlier this year that suggested such a move.
Net income for the third quarter was $20.69 billion, or $1.89 per share, compared with $21.19 billion, or $1.95 per share, in the same period last year. The company said the decline was primarily driven by a $9.5 billion pre-tax gain from its investment in AI startup Anthropic recorded in the third quarter of 2025.
While the AWS division continues to perform well, the results of Amazon’s retail and advertising divisions, which remain its largest divisions by revenue, have been less positive.
Online sales rose 2% from a year earlier to $68.47 billion, according to Street Accounts, which was below analysts’ expectations of $69.68 billion. That’s a slowdown from a year ago, when sales rose nearly 10%.
Advertising revenue increased 11% year over year to $19.64 billion. That fell short of the Street consensus estimate of $20.82 billion.
Both divisions were affected in part by Amazon’s decision to bring forward its annual Prime Day sale in some countries from its usual third-quarter period to the second quarter so as not to overlap with the FIFA World Cup in July.
Amazon stock price chart.
