Amazon shares fell sharply in after-hours trading last night after the company disclosed a massive cash burn in its third-quarter results, with spending on artificial intelligence infrastructure eclipsing the fastest cloud growth in nearly five years.
The Seattle-based retailer burned $42.4 billion on a trailing 12-month basis in the quarter ended September, driven by capital expenditure of $77.26 billion, some $20 billion above analyst estimates compiled by LSEG, according to RTE.ie. Shares dropped as much as 7% in extended trading, having already fallen 4.3% in the regular session to close at $243.79.
Why investors turned on Amazon
The numbers tell a story of a company generating enormous cash and then spending even more of it. Amazon reported cash burn of $7.6 billion in the prior quarter, and it generated $14.8 billion in the third quarter of last year. The swing has alarmed investors who once rewarded the company for turning growth into steady profits.
“The free cash flow looks like the ugly part of the report,” said Dave Wagner, portfolio manager at Aptus Capital Advisors. “Operations generated plenty of cash but their capex just absolutely swallowed it.”
“The trend is pretty steep and pretty negative, and that's the big thing that is alarming in this report,” he added.
Chief executive Andy Jassy told analysts on a conference call that he expected capital expenditures to be “meaningfully more” next year compared with 2026. Amazon has already forecast $220 billion in capital expenditures this year, a figure that dwarfs the annual budgets of most European states. For a company once praised for its discipline, the bill for the AI race is now the whole story.
Jassy attempted to calm nerves. “Our strategy is working and I expect it will for the foreseeable future,” he said, adding that Amazon Web Services could reach a trillion dollars in revenue in as little as five years.
Not everyone was convinced. Jesse Cohen, a senior analyst at Investing.com, pointed to the free cash flow figures and what he called weak guidance as reasons for the share decline. “Amazon's third-quarter report landed as a double disappointment,” he said, as reported by Yahoo! Finance.
Cloud business grows at fastest pace in five years
Beneath the market turbulence, the underlying business is performing. Revenue at Amazon Web Services rose 39% to $46 billion in the third quarter, beating analyst estimates of a 38.2% increase to $45.61 billion, according to LSEG data. Ground News reported that the cloud unit grew at its fastest pace in nearly five years, after a 37% jump in the second quarter.
Advertising was the weaker spot. Ad sales rose just 12% to $19.6 billion from a year earlier, well below the 18% estimate from LSEG. It was the first time advertising missed analyst estimates in seven quarters, and growth slowed sharply from the second quarter's 26%.
Jassy said he was “pleased” with advertising sales and argued that moving the Prime Day discount event into the second quarter had dented the period's figures. He forecast a return to “high teens” ad sales growth in the current quarter, and dismissed concerns that AI shopping agents, which automate people's purchasing, had hurt the business. Amazon blocked Meta's Muse agent from its site during the quarter after the tool attempted to shop on customers' behalf.
A tech selloff with wider ripples
Amazon's decline did not happen in isolation. The drop mirrored a broader selloff among tech stocks last night after Intel warned of flagging PC revenue through the first half of next year, sending its own shares down 23% in after-hours trading. Alphabet fell 12% during the regular session, its worst single-day percentage decline ever.
Amazon and Alphabet have held their spending expectations steady, though Microsoft on Wednesday lowered its own forecast to $170 billion from $175 billion, according to Reuters. The message from the sector is consistent: the AI arms race demands unprecedented investment, and no major player is willing to step back.
What it means for consumers this Christmas
The downbeat fourth-quarter outlook signals that US retailers could face a difficult Christmas season, with consumers tightening budgets amid higher gasoline prices and a rising cost of living. For working households, that pressure is familiar; it is the same squeeze visible on Irish high streets every week.
Still, industry forecasts offer some hope. The National Retail Federation earlier this month predicted a 4.2% jump in total US holiday season sales compared with last year.
While retail sales account for the majority of Amazon's revenue, investor attention has shifted decisively toward the cloud business in recent years as the company spends heavily on data centres to compete in the global AI race. At its e-commerce arm, Amazon has been rolling out faster delivery services globally and expanding into more rural areas of the US to draw in more shoppers.
Amazon expects fourth-quarter revenue between $240 billion and $247 billion, bracketing analyst estimates of $244.51 billion, though its midpoint of $243.5 billion came in slightly lower.
Questions readers are asking
Why did Amazon shares fall after its third-quarter results?
Shares fell because Amazon burned $42.4 billion in cash over the trailing 12 months, with capital expenditure of $77.26 billion coming in roughly $20 billion above estimates, and because the company guided for “meaningfully more” spending next year.
Is Amazon's cloud business still growing?
Yes. Amazon Web Services revenue rose 39% to $46 billion in the third quarter, its fastest growth in nearly five years, and Jassy said the unit could reach a trillion dollars in revenue within five years.
How much is Amazon spending on AI this year?
Amazon has forecast $220 billion in capital expenditures for this year, one of the largest corporate investment programmes ever undertaken, and spending is expected to rise again in 2027.