Amazon’s race to build artificial intelligence infrastructure is now consuming cash faster than its booming cloud business can generate it.
The Seattle company reported on Thursday that revenue rose 12% to $201.94 billion in the third quarter, just short of the $202.31 billion analysts had expected, while earnings of $1.89 a share missed the $1.96 consensus. Shares fell about 7% in after-hours trading before recovering some ground to end Friday’s session down nearly 2%.
The disappointment came despite a standout performance from Amazon Web Services, the cloud division that underpins much of the AI boom. AWS revenue rose 39% to $46 billion, its fastest growth in nearly five years and ahead of the $45.61 billion analysts had forecast, while its operating income jumped 55% to $17.8 billion. Chief executive Andy Jassy told analysts the division’s backlog had reached $578 billion and suggested AWS could one day reach $1 trillion in annual revenue.
What unsettled investors was the price of that growth. Amazon spent $75.9 billion on capital projects in the quarter, mostly data centres and chips for AI, leaving it with negative free cash flow of $42.4 billion over the trailing twelve months — six times the $7.6 billion deficit of the previous quarter and a sharp reversal from the $14.8 billion it generated in the same period last year. The company held its full-year capital spending forecast at about $220 billion and warned that spending in 2027 would be “meaningfully more”.
Other parts of the business also underwhelmed. Online sales grew just 2% to $68.5 billion, the slowest pace since early 2023, and advertising revenue rose 12% to $19.6 billion, below the 18% analysts had expected — the first advertising miss in seven quarters. Amazon forecast fourth-quarter revenue of $240 billion to $247 billion, with the midpoint slightly below Wall Street’s $244.51 billion consensus, raising questions about the crucial holiday season.
The results land in a market already anxious about whether the vast sums pouring into AI will pay off quickly enough. Amazon’s experience captures that tension precisely: demand for cloud computing has rarely been stronger, yet satisfying it is burning through cash at an unprecedented rate. Jassy sought to reassure investors, saying the company installs an AI accelerator roughly every 14 seconds and that customers consume new capacity almost as fast as it arrives.
Whether that bet pays off will shape not only Amazon’s fortunes but the wider debate over the AI boom — and, with spending set to rise further next year, the answer is unlikely to come cheap.
Sources: Reuters, “Amazon projects fourth-quarter sales below estimates” (https://www.reuters.com/business/retail-consumer/amazon-projects-fourth-quarter-sales-below-estimates-2026-10-29/); Amazon third-quarter 2026 earnings release, as reported by Reuters and the Associated Press.
