Amazon shares sink as massive AI spending overshadows cloud growth
Amazon just reported third-quarter revenue of $201.9 billion.
The short version
- Profit reached $20.7 billion and missed analyst targets.
- Heavy AI data center spending pushed cash flow negative.
- For your business, massive tech outlays signal shifting costs.
Amazon shares sank in after-hours trading after the e-commerce giant reported third-quarter revenue of $201.9 billion, missing Wall Street expectations. Profit came in at $20.7 billion, down from the same period a year ago due to prior gains from its investment in Anthropic, the artificial intelligence lab backed by major tech firms.
Amazon Web Services, the company's cloud computing unit, saw third-quarter sales rise 39.3% to $45.98 billion, topping analyst targets. According to Fortune, the Seattle-based company is continuing to spend at unprecedented rates on artificial intelligence data centers, with 2026 capital expenditures expected to reach about $220 billion.
The heavy infrastructure spending pushed free cash flow from positive $14.8 billion to negative $42.4 billion over the past year. Amazon’s advertising business grew 12% year over year, also missing expectations, while its projected holiday-quarter operating profit fell below estimates. Anthropic’s recent initial public offering prospectus revealed the lab has committed to spending at least $110 billion on Amazon cloud services through April 2036.
Meanwhile, Amazon is hiring 300,000 workers for the holidays while cutting hundreds of jobs in its devices and retail departments. When the biggest spenders on earth start watching their cash flow, it is time to check your own warehouse inventory.
