Amazon reported its third-quarter results on Thursday, October 29, and investors did not like what they saw. The company’s shares fell about 7% in after-hours and premarket trading, even though its cloud business had one of its best quarters in years.
That reaction tells you a lot about how the stock market works right now. Good news is not always enough. When a company is spending as much money as Amazon is, investors want everything to be perfect.
What Happened
Amazon’s total sales rose 12% to $201.9 billion in the three months ended September 30, 2026. That was slightly below the $202.31 billion analysts expected.
Earnings per share came in at $1.89, also below the $1.96 that analysts had forecast. Net income fell slightly to $20.7 billion, from $21.2 billion a year earlier. Part of that drop is because last year’s quarter included a $9.5 billion one-time gain from Amazon’s investment in Anthropic, an AI company. Without that gain, the comparison would look better.
The bright spot was Amazon Web Services, or AWS, the company’s cloud computing business. AWS sales jumped 39% to $46.0 billion, its fastest growth in nearly five years. AWS now runs at a $184 billion annual revenue pace. Its operating profit rose to $17.8 billion.
Advertising revenue grew 11% to $19.6 billion, but that was also below expectations of $20.8 billion. Online store sales grew just 2% to $68.5 billion.
For the holiday quarter, Amazon expects sales of $240 billion to $247 billion, growth of 12% to 16% from a year earlier. The middle of that range was a little below what analysts had hoped for.
Why It Happened
The main reason investors sold the stock is spending. Amazon spent $77.3 billion on property and equipment in the quarter alone, more than double the $35.1 billion it spent a year earlier. Most of that money goes to data centres and AI chips.
For the full year, Amazon is keeping its capital spending plan at about $220 billion. That is a huge number. It is also why the company’s free cash flow, the cash left over after spending on things like data centres, turned negative. Over the past twelve months, free cash flow was negative $42.4 billion, compared with a positive $14.8 billion a year earlier.
Think of it this way. Imagine a shop owner who is making more money than ever, but is also building ten new shops at the same time. The business looks great on paper, but the bank balance goes down because all the cash is going into construction. That is roughly what Amazon is doing, except the “shops” are data centres for artificial intelligence.
Amazon’s chief executive, Andy Jassy, said the company expects AWS revenue to grow by more than 40% in both 2027 and 2028. The company says customers are using the new AI capacity almost as fast as it is built. But investors want proof that this spending will turn into steady profits, not just faster revenue growth.
Key Figures
- Total sales: $201.9 billion, up 12% (expected: $202.31 billion)
- Earnings per share: $1.89 (expected: $1.96)
- AWS sales: $46.0 billion, up 39%
- AWS operating profit: $17.8 billion
- Quarterly capital spending: $77.3 billion
- Trailing twelve-month free cash flow: negative $42.4 billion
- Fourth-quarter sales forecast: $240 billion to $247 billion
- Full-year 2026 capital spending plan: about $220 billion
Why It Matters
Amazon is not alone. This week, several big technology companies reported strong revenue growth but negative free cash flow because of heavy AI spending, and their stocks fell. It is a sign that investors are starting to ask harder questions about the AI boom: how much will all this spending cost, and when will it pay off?
Related reading: Why Google Stock Crashed 12.6%: What Investors Need to Know
Amazon’s case is also a useful lesson for beginners. A company can grow fast and still see its stock fall. The stock market reacts to expectations, not just results. When expectations are very high, even a small miss can cause a big drop.
What Happens Next
All eyes will be on the holiday quarter. Amazon’s fourth quarter is its biggest of the year, and the $240 billion to $247 billion forecast will be tested against real holiday shopping. Investors will also watch whether AWS growth stays above 40% next year, as the company predicts, and whether free cash flow starts to improve as the new data centres fill up.
Final Thoughts
Amazon’s business is still growing, and its cloud division is performing very well. But the stock’s fall is a reminder that growth funded by massive spending comes with a question mark. Until the cash starts flowing back, investors will stay nervous, and that nervousness can hit even the strongest companies.
Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.
Sources: CNBC, “Amazon falls 7%, Intel plunges 25% in premarket trading, as pressure mounts after earnings” (https://www.cnbc.com/2026/10/30/amazon-intel-earnings-big-tech-ai-spending-concerns.html); Amazon Q3 2026 earnings release (https://www.aboutamazon.com/news/company-news/amazon-earnings-q3-2026-report).
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