Amazon lost more than 7% in Friday’s after-hours session as its third-quarter report showed earnings below expectations and a widening cash shortfall. Spending on artificial intelligence infrastructure exceeded analysts’ projections, while the company’s fourth-quarter revenue outlook was also disappointing.
Across the group, revenue increased 12% from a year earlier to $201.94 billion, missing the $202.31 billion consensus forecast. Earnings excluding certain expenses, including stock compensation, were $1.89 a share; analysts had expected $1.96.
Operating income provided a stronger result. At $28.1 billion, it surpassed the $26.2 billion Wall Street estimate. That measure excludes investment gains and losses unrelated to operating performance, offering a more direct view of the underlying business.
Net income, by contrast, declined from $21.19 billion to $20.69 billion, affected mainly by a $9.5 billion pretax gain on Amazon’s stake in AI startup Anthropic PBC that had lifted the year-earlier result.
Capital expenditures totaled $77.3 billion for the quarter, compared with the $58.7 billion analysts had anticipated and $35.1 billion a year earlier. Despite that increase, Amazon left its full-year 2026 spending plan unchanged at $220 billion.
Free cash flow was negative $42.4 billion, following another deficit in the preceding quarter. Chief Financial Officer Brian Olsavsky attributed the higher spending to additional purchases of property and equipment needed for the company’s AI investments.
The cash demands drew investor attention even as management emphasized the returns it expects from expanding its infrastructure. Chief Executive Andy Jassy told investors that expenditure would rise substantially in 2027 and said Amazon could identify attractive financial returns from those investments.
Amazon’s spending trajectory contrasts with some signs of restraint elsewhere among the major cloud infrastructure providers. Microsoft earlier this week reduced its annual capital expenditure forecast from $175 billion to $170 billion. Alphabet kept its projected spending range at $195 billion to $205 billion, as the industry continues building capacity to serve AI demand.
The cloud division was a stronger performer than either retail or advertising. Amazon Web Services generated revenue of $45.98 billion, up 39% from a year earlier and slightly above the $45.9 billion analyst forecast.
With Wall Street pressing Amazon to demonstrate that AI expenditure is producing revenue growth, the company highlighted increasing adoption of Bedrock, its marketplace for AI models. It also cited traction for its Trainium and Graviton AI chips.
Jassy said the results reflected the effectiveness of AWS investment in infrastructure and functionality. He expects the continued AI expansion to push the division’s annual sales growth above 40% next year and in fiscal 2028.
The cloud performance offered support for management’s investment plans, but it did not offset investor concern over the immediate effect of spending on cash flow.
His longer-term forecast puts AWS on a substantially larger revenue footing: Jassy told investors he expects the business to reach $1 trillion in revenue within five to 10 years.
Amazon forecast fourth-quarter revenue of $240 billion to $247 billion. The middle of that range sits below the $244.5 billion expected by analysts. Holiday purchases typically make the final three months of the year Amazon’s largest quarter.
That outlook followed weaker-than-expected sales in both online retail and advertising. Amazon’s retail operation remains its biggest business by revenue.
Online sales reached $68.47 billion, representing annual growth of 2%, against a $69.68 billion forecast compiled by StreetAccount. The increase was considerably slower than the nearly 10% growth recorded a year earlier.
Advertising brought in $19.64 billion, an 11% increase from the comparable quarter, but below analysts’ $20.82 billion estimate.
Jassy attributed part of the shortfall in both businesses to a change in the timing of Prime Day across several countries. Amazon moved the annual promotion into the second quarter from its usual third-quarter slot to avoid a clash with July’s FIFA World Cup.
