Earnings · $AMZN
Amazon Slides After Hours as AI Spending Turns Free Cash Flow Negative Despite 39% AWS Growth
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The cloud unit posted its fastest growth in years, but a $42.4 billion free cash outflow and an unchanged $220 billion spending plan weighed on the shares.
By Emma Cruz ·
Amazon shares fell in extended trading on Thursday after the company reported a sharp acceleration in its cloud business but also showed how heavily its artificial intelligence buildout is weighing on cash generation.
The stock dropped as much as 10% in after-hours trading before paring some of those losses [1]. It had already closed the regular session at $243.79, down 4.25%, on a day when a steep selloff in Alphabet weighed on large technology stocks [2].
For the third quarter ended September 30, Amazon reported net sales of $201.9 billion, up 12% from $180.2 billion a year earlier, or 13% excluding the effect of foreign exchange [3]. Operating income rose to $28.1 billion from $17.4 billion, for an operating margin of 13.9% [3]. Net income slipped to $20.7 billion, or $1.89 a diluted share, from $21.2 billion, or $1.95 a share, a year earlier. The company said the comparison was affected by $9.5 billion of pre-tax gains on its Anthropic investments in the year-ago quarter [3].
Amazon Web Services was the standout. Segment sales rose 39% to $46.0 billion, the fastest growth among Amazon's three segments [3], and The Motley Fool highlighted the cloud unit's acceleration as the headline of the quarter [2]. Chief Executive Andy Jassy said in the release that the company's "AWS investment in functionality and infrastructure is working" [3]. Amazon said AWS signed new agreements with Meta, Nvidia, OpenAI and Salesforce during the quarter [3].
The retail businesses grew more slowly. North America segment sales rose 6% to $112.9 billion, and International sales rose 5% to $43.1 billion, or 8% excluding currency effects [3]. Amazon said the move of its Prime Day event into the second quarter this year would otherwise have added about 400 basis points to third-quarter year-over-year growth [3].
The pressure point for investors was cash. Purchases of property and equipment reached $77.3 billion in the quarter and $215.2 billion over the trailing 12 months [3]. As a result, trailing 12-month free cash flow was an outflow of $42.4 billion, compared with an inflow of $14.8 billion a year earlier, even as operating cash flow rose 29% to $168.3 billion over the same period [3]. The company said it still expects cash capital expenditures of about $220 billion for 2026 [3].
The results land in a week in which investors have been weighing the returns on AI spending across the largest technology companies. Alphabet shares suffered their worst day since 2004 on Thursday after its own results raised similar questions about cash flow and the payback on AI investment [1].
For the fourth quarter, Amazon forecast net sales of $240.0 billion to $247.0 billion, which would represent growth of 12% to 16%, and operating income of $28.5 billion to $33.5 billion [3].
What to watch next: whether the after-hours decline holds when regular trading opens on Friday, any detail from management on the timing of returns from its data center buildout, and how the market weighs AWS's acceleration against the strain on free cash flow.
Sources:
[1] Yahoo Finance, "Stock market today: Dow, S&P 500, Nasdaq slip as Alphabet stock sinks 12% and AI jitters return", October 29, 2026. https://finance.yahoo.com/markets/live/stock-market-today-thursday-october-29-dow-sp-500-nasdaq-alphabet-microsoft-earnings-130305714.html
[2] The Motley Fool, "AWS Jumps 39% as Amazon's Cash Flow Sinks: Rapid Earnings Reaction", October 29, 2026. https://www.fool.com/investing/2026/10/29/aws-jumps-39-as-amazons-cash-flow-sinks-rapid-earn/
[3] Amazon.com, Inc., "Amazon.com Announces Third Quarter Results", October 29, 2026. https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Third-Quarter-Results/default.aspx
This article was produced with AI assistance. It is for informational purposes only and is not financial advice. StockVolt and its authors may hold positions in securities mentioned.