Amazon Q3 earnings revenue and profit miss expectations, AWS revenue up about 39% but AI investment leads to $42.4 billion cash outflow

Cailian Press Financial News Agency

Open the APP

Fell more than 7% after hours! Amazon's Q3 earnings report shows "fire and ice": AWS's high growth cannot offset the consequences of "AI cash burn"

Cailian Press Huang Junzhi | Editor: Lin Qi | 2026-10-30 08:38

① Amazon's third-quarter revenue was $201.94 billion, and earnings per share were $1.89, both below market expectations; ② AWS third-quarter revenue was $45.984 billion, up about 39% year over year, the fastest year-over-year growth rate in nearly five years; ③ Cash outflow over the past 12 months reached as high as $42.4 billion.

Cailian Press, October 30 (Editor: Huang Junzhi) — After the U.S. stock market closed on Thursday, Amazon's share price plunged as much as 12%, and as of press time the decline had narrowed to about 7%. Earlier, the company reported disappointing third-quarter results and an expanding free cash flow outflow, reflecting its massive continued investment in artificial intelligence (AI).

According to the earnings report, here is how the company's Q3 performance compared with LSEG's consensus expectations:

Earnings per share: $1.89, versus expectations of $1.96;

Revenue: $201.94 billion, versus expectations of $202.31 billion.

The earnings report also showed that operating profit rose 61.5% year over year to $28.08 billion, more than 7% above market expectations, and the operating margin rose to 13.9%, the highest level in the company's history.

Business segments

This quarter, the cloud computing business became Amazon's most prominent performance highlight. The earnings report showed that revenue at Amazon Web Services (AWS) reached $45.984 billion in the third quarter, up about 39% from $33.006 billion in the same period last year, the fastest year-over-year growth rate in nearly five years, with an annualized revenue run rate of about $184 billion.

At the same time, AWS operating profit reached $17.773 billion, up about 55% from $11.434 billion in the same period last year; the operating margin rose to 38.7% from 34.6% in the same period last year.

Amazon CEO Andy Jassy also highlighted AWS's accelerating development on the earnings call, saying the company expects revenue growth rates of "more than 40%" next year and in 2028. He added: "Our investments in AWS capabilities and infrastructure are paying off."

"We have always believed AWS could become a business with hundreds of billions of dollars in revenue, and now we believe it will be at least twice that number, and very likely eventually become our trillion-dollar annual revenue business," he added.

Amazon is facing pressure from Wall Street to prove that its AI investments are boosting revenue. The company noted growing market demand for AWS's generative AI service Amazon Bedrock, as well as its Trainium and Graviton AI chips.

Jassy said Amazon's chip business "continues to maintain triple-digit growth rates each year." He also added that the company plans to launch its Trainium chips to the external market "by the end of 2027," consistent with the timing he hinted at earlier this year.

Although the AWS business continued to thrive, the performance of Amazon's retail business (still its highest-revenue segment) and advertising business was less than satisfactory.

The earnings report showed that online sales rose 2% year over year to $68.47 billion, below analysts' forecast of $69.68 billion. That was a slowdown from nearly 10% growth a year earlier; advertising revenue rose 11% year over year to $19.64 billion. That figure was below analysts' consensus expectation of $20.82 billion.

Both segments were affected by Amazon's decision to move the annual Prime Day promotional event in some countries from its usual third quarter to the second quarter, to avoid a clash with the FIFA World Cup in July.

The capital expenditure issue was the main reason for investor disappointment. Amazon's aggressive investment in AI has severely eroded its cash flow. The company reported a free cash flow outflow for the second consecutive quarter, with cash outflow over the past 12 months reaching as high as $42.4 billion. In the previous quarter, the company reported free cash flow of -$7.6 billion.

The company made clear that the funding gap was mainly due to increased purchases of property and equipment driven by AI investment.

The earnings report showed that in the third quarter, Amazon's spending on purchases of property and equipment was $77.26 billion, far above $35.1 billion in the same period last year and far exceeding market expectations of $58.7 billion. Over the past 12 months, the company's net purchases of property and equipment reached $210.66 billion, up 82% year over year.

Under the company's disclosed free cash flow calculation method, namely operating cash flow minus net cash spending on purchases of property and equipment, third-quarter free cash flow was about -$33.456 billion.

In addition, Amazon kept its forecast for 2026 capital expenditures unchanged, saying it still expects this year's spending to reach $220 billion. Jassy further said on the earnings call that the company expects "a significant increase in spending in 2027," and that Amazon is "on track to deliver substantial financial returns."

Business outlook

Looking ahead to the fourth quarter of 2026, Amazon expects net revenue to be between $240 billion and $247 billion, up 12% to 16% year over year. Data from LSEG shows that Amazon's midpoint guidance is below Wall Street's previous forecast of $244.5 billion. As it coincides with the peak of the holiday shopping season, the fourth quarter is usually one of Amazon's highest-revenue quarters. The company said the revenue guidance is expected to include an unfavorable foreign exchange impact of about 0.6 percentage points.

On profitability, Amazon expects fourth-quarter operating income of $28.5 billion to $33.5 billion, higher than $25 billion in the same period last year, but the market expected about $33.1 billion.

Amazon said future performance may still be affected by factors such as the global economic environment, foreign exchange rates, energy prices, trade policy, supply chains and changes in customer demand. Jassy noted that as the AWS cloud computing and artificial intelligence businesses continue to expand and retail business margins keep improving, the company is seizing long-term growth opportunities across multiple business areas.

Global Market Intelligence

U.S. Stock Market Dynamics

Cailian Press statement: The content of this article is for reference only and does not constitute investment advice. Investors who act on it do so at their own risk.

Business Cooperation

Popular Unlocks

[Institutional Research] This memory chip supplier has completed a small-computing-power layout in the smart vision SoC field

This memory chip company has become a major supplier to leading AI server manufacturers and has completed a small-computing-power layout in the smart vision SoC field.

[Research Selection • Margin Trading Data] Robots + Pharmaceuticals + PCB + Chips + AI Applications: Net margin buying in five major hot spots over the past week (attached table)

Robots + Pharmaceuticals + PCB + Chips + AI Applications: Net margin buying in five major hot spots over the past week (attached table).

[Research Selection • Industry Data] Food and beverage holdings have bottomed out and are recovering; analysts judge that the orderly clearing of baijiu has reached clear bottom signals

Food and beverage holdings have bottomed out and are recovering; analysts judge that the orderly clearing of baijiu has reached clear bottom signals (attached table).

Related Reading

Does the Fed's pause not mean a pivot? Bank of America says: 25 basis point hikes may come in December and March next year!

Cailian Press Huang Junzhi 2026-10-30 11:32

① Bank of America expects rate hikes of 25 basis points in December 2026 and March 2027 respectively, raising the federal funds target rate range to 4.25%–4.50%; ② At its October meeting, the Federal Reserve voted 10 to 2 to keep the federal funds target rate range unchanged at 3.75% to 4%.

Plunging 23% after hours! What panicked Intel investors is far more than weakness in the PC market

Cailian Press Liu Rui 2026-10-30 10:56

① Intel's Client Computing and Physical AI segment revenue fell 5% year over year to $8.1 billion in the third quarter, missing expectations; ② An explosion at an Israeli wafer fab caused a prolonged shutdown of the plant, affecting shipments of 10-nanometer chips, with an estimated combined revenue loss of about $600 million over two quarters; ③ Intel expects 2026 capital expenditures of about $20 billion and will find it difficult to achieve positive free cash flow.

Up more than 60% in three months! DDR5 memory prices soar in Japan; one memory kit now costs as much as a whole computer last year

Cailian Press Ma Lan 2026-10-30 10:29

① A survey by Akihabara PC Hotline in Japan shows that most DDR5 memory kit prices have risen 4 to 5 times year over year, with month-on-month increases of as much as 62%; ② The rise in DDR5 prices has also boosted DDR4 demand, with DDR4 memory prices rising about 24% over the past three months; ③ Another report points out that due to insufficient inventory, DDR4 memory is seeing the contradictory situation of rising prices and weak trading.