Amazon shares fell more than 7% in extended trading on Thursday after the company reported third-quarter earnings and revenue below Wall Street expectations, while its aggressive artificial intelligence infrastructure spending continued to weigh on cash flow.
The results exposed a widening contrast within the technology giant. Amazon Web Services (AWS) delivered stronger-than-expected growth, supported by demand for cloud computing and AI infrastructure, but the company’s retail and advertising businesses fell short of analysts’ forecasts. Investors also have to contend with a spending plan that CEO Andy Jassy says will expand further in 2027, even as the company’s free cash flow deteriorates.
Amazon reported earnings per share of $1.89, below the $1.96 expected by analysts surveyed by LSEG. Revenue reached $201.94 billion, missing the $202.31 billion consensus estimate.
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Net income declined to $20.69 billion, or $1.89 per share, from $21.19 billion, or $1.95 per share, a year earlier. Amazon attributed the decline primarily to a $9.5 billion pre-tax gain from its investment in AI startup Anthropic that had boosted the comparable period in 2025.
The revenue miss was relatively narrow, but the reaction indicates investors were concerned about more than the headline figures. With major technology companies committing hundreds of billions of dollars to AI infrastructure, markets are increasingly demanding evidence that the spending can generate durable revenue and cash returns without undermining the profitability of established businesses.
AWS revenue rose 39% year over year to $45.98 billion, exceeding the $45.29 billion analysts had expected, according to StreetAccount. The result reinforced the cloud division’s importance to Amazon’s AI ambitions and provided one of the strongest elements of the quarterly report.
Jassy said AWS was expected to deliver revenue growth of more than 40% in both 2027 and 2028, adding that the company’s investments in infrastructure and functionality were producing results.
“Our AWS investment in functionality and infrastructure is working,” he said.
The forecast suggests Amazon expects demand for cloud services to remain strong enough to support further expansion. Businesses developing and deploying AI systems need access to computing capacity, storage and networking, giving cloud providers an opportunity to capture a growing share of AI-related expenditure.
However, the revenue outlook also raises the stakes for Amazon’s capital spending programme. The company maintained its forecast for capital expenditure of $220 billion in 2026, while Jassy said Amazon expects to “spend meaningfully more in 2027.” He also told investors that the company has a “clear line of sight to attractive financial returns.”
That assurance comes as cash generation weakens. Amazon recorded negative free cash flow of $42.4 billion over the trailing 12 months, a 386% increase in the outflow from a year earlier. The company had reported negative free cash flow of $7.6 billion in the preceding quarter.
Amazon said the deterioration was primarily driven by increased purchases of property and equipment associated with AI investments. Such spending can support future growth, but it requires substantial cash before the resulting infrastructure is fully utilized and begins generating returns.
The distinction between accounting profit and cash flow is becoming more notable to investors assessing the AI investment cycle. A company can remain profitable while its infrastructure programme consumes more cash than its operations generate after capital expenditure. If spending continues to rise, the timing and scale of future returns become central to its valuation.
Amazon is not alone in facing these questions. Microsoft lowered its capital expenditure forecast for the year to $170 billion from $175 billion earlier in the week, while Alphabet maintained its 2026 guidance at $195 billion to $205 billion. The different spending signals have increased scrutiny of whether the largest technology companies can sustain their AI infrastructure commitments while protecting cash generation.
Amazon’s decision to retain its $220 billion forecast indicates that it has not yet joined Microsoft’s reported reduction. But its plan to spend more next year means investors will need clearer evidence that AWS growth can translate into improving free cash flow over time.
Retail and Advertising Miss Estimates Ahead of Holiday Season
Amazon’s core retail operations delivered a weaker performance than its cloud division. Online sales increased 2% year over year to $68.47 billion, falling short of the $69.68 billion expected by analysts, according to StreetAccount.
Advertising revenue declined 11% to $19.64 billion, missing the $20.82 billion consensus estimate. The company said both businesses were affected by its decision to move Prime Day sales forward in several countries from their usual third-quarter timing into the second quarter to avoid a scheduling conflict with the FIFA World Cup in July.
That shift complicates year-over-year comparisons and means the declines should not automatically be interpreted as evidence of a lasting deterioration in consumer demand or advertising performance. Nevertheless, the shortfalls left investors with less support from businesses that complement AWS and remain important to Amazon’s overall revenue base.
Advertising is extremely relevant because it can provide a different source of earnings growth from the capital-intensive cloud business. A weaker result therefore matters not only as a revenue miss but also because it limits the contribution from a business that does not require the same scale of physical infrastructure investment as AI computing.
Amazon’s fourth-quarter guidance offered a more encouraging near-term signal. The company expects revenue of between $240 billion and $247 billion, broadly in line with analysts’ consensus estimate of $244.5 billion, according to LSEG. The quarter typically benefits from the holiday shopping season, one of the busiest periods for the company’s retail operations.
The forecast leaves open the possibility of stronger seasonal sales offsetting the third-quarter weakness in online shopping and advertising. It also does little to resolve the broader question confronting investors: how quickly Amazon can convert its expanding AI infrastructure into cash earnings.
Amazon’s latest results show that demand for cloud computing remains a powerful growth driver, with AWS outperforming expectations and management forecasting further acceleration. But the share-price decline exposes the limits of that strength when other major businesses disappoint, and investment spending overwhelms cash generation.