Amazon tumbles 9% after-hours as AI outlays dent cash flow despite AWS surge
Amazon's stock sank more than 9% in after-hours dealing on October 29 following third-quarter results that trailed Wall Street forecasts, even as its cloud arm AWS posted its strongest expansion in almost five years.
Quarterly sales climbed 12% from a year earlier to $201.9 billion, narrowly missing the roughly $202.25 billion analysts had penciled in. Per-share profit of $1.89 also fell short of the $1.97 consensus, and net income eased to $20.7 billion versus $21.2 billion in the same period last year, a decline attributed in part to gains booked on investments in the prior-year quarter.
The cloud computing division once again proved the bright spot, with sales jumping 39.3% to $46 billion — ahead of the roughly $45.6 billion analysts had modeled and its sharpest pace of growth in close to five years. Segment operating profit nearly doubled to $17.8 billion, up from $11.4 billion, underscoring heavy demand for AI-driven computing power.
Yet that performance did little to calm investor nerves over the company’s capital outlay. Amazon is projecting roughly $220 billion in capital spending for 2026, directed chiefly toward AI infrastructure, data centers, and cloud capacity. Chief Executive Andy Jassy indicated such spending would climb substantially further next year. On a trailing 12-month basis through September, free cash flow swung to a $42.4 billion deficit from a positive $14.8 billion a year prior, as outlays on property and equipment outran a 29% increase in cash generated from operations.
Guidance for the critical holiday season compounded the worry: Amazon pointed to fourth-quarter revenue between $240 billion and $247 billion, falling short of the roughly $244.51 billion midpoint analysts had expected, alongside projected operating income of $28.5 billion to $33.5 billion. Its advertising arm grew sales 12% on a currency-adjusted basis to $19.6 billion, and the company anticipates that pace accelerating into the high-teens range during the final quarter.
Why it matters for markets: Given its weight in the S&P 500 and Nasdaq 100, Amazon’s steep after-hours decline could ripple through broader US equity benchmarks, while its spending outlook shapes how investors gauge the payoff from massive AI capital commitments across the technology sector.
Source: Economic Times Markets