Amazon shares drop after missing forecasts while cloud sales jump

UPDATE - follow-up to Amazon misses on earnings and holds capex steady, adding to AI spending jitters: Amazon shares fell more than seven percent in extended trading after third-quarter earnings and revenue missed Wall Street expectations.

Financial Results

The company posted a net income of twenty point six nine billion dollars, or one dollar and eighty-nine cents per share, compared to twenty-one point one nine billion dollars, or one dollar and ninety-five cents per share, a year earlier. Amazon stated this decrease came mainly from a nine point five billion dollar pre-tax gain from its investment in the AI startup Anthropic recorded in the third quarter of 2025. Meanwhile, online sales rose two percent year over year to sixty-eight point four seven billion dollars, which missed the projected sixty-nine point six eight billion dollars. Advertising revenue reached nineteen point six four billion dollars, falling short of the twenty point eight two billion dollar consensus estimate.

Cloud Growth and Cash Flow

Cloud segment sales jumped thirty-nine percent year over year to forty-five point nine eight billion dollars, beating the forecast of forty-five point two nine billion dollars. CEO Andy Jassy pointed out this strong growth and said the company expects revenue growth rates of over forty percent next year and in 2028. Heavy artificial intelligence investments pushed Amazon to post negative free cash flow for the second straight quarter, with an outflow of forty-two point four billion dollars for the trailing twelve month period. This marks a three hundred eighty-six percent increase from the previous year, following a negative free cash flow of seven point six billion dollars in the prior quarter. The company held its capital expenditure forecast for 2026 steady at two hundred twenty billion dollars.

Context

Large technology companies are spending heavily on data centers and server equipment to support the rapid growth of artificial intelligence tools. These massive investments require billions of dollars in upfront capital, which can temporarily reduce a company's free cash flow even as cloud computing divisions continue to expand rapidly.