Amazon reported mixed third‑quarter results: revenue and operating profit increased, led by strong growth at AWS, but free cash flow turned sharply negative due to large capital expenditures tied mainly to AI development.
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Consolidated revenue rose 12% year‑over‑year to $201.9 billion, slightly below the $202.1 billion analysts had expected. Earnings per share were $1.89 versus the $1.96 consensus.
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Operating income increased 61% to $28.1 billion, and the operating margin reached a record 13.9%. Net income declined from $21.2 billion to $20.7 billion; last year’s result had been boosted by a $9.5 billion pre‑tax gain recorded on the Anthropic investment.
AWS drives fast growth
Amazon Web Services (AWS) revenue grew 39.3% to $46.0 billion, beating the $45.61 billion consensus. This represents the fastest AWS growth rate in nearly five years.
Advertising revenue lags and Prime Day timing effect
Advertising revenue rose only 12% to $19.6 billion, missing the expected 18% expansion. Management attributed part of the shortfall to Prime Day timing, noting that in most major markets the event occurred in the second quarter this year.
Cash flow hit by heavy investments
Trailing twelve‑month free cash flow was negative $42.4 billion, down from positive $14.8 billion a year earlier. Operating cash flow increased 29% to $168.3 billion, but capital expenditures—largely for AI initiatives—outpaced that growth and consumed substantial cash.
Amazon reaffirmed its capital expenditure plan for the current year at about $220 billion, and CEO Andy Jassy warned that spending will be significantly higher next year.
Outlook and market reaction
For the fourth quarter the company expects revenue of $240–247 billion; the midpoint of $243.5 billion is slightly below the $244.51 billion analyst consensus. Operating income is guided to $28.5–33.5 billion compared with $25 billion a year earlier.
After the release, Amazon shares fell roughly 7% in after‑hours trading. Investors focused on the deterioration in free cash flow and the prospect of further increased capital spending next year. The weaker‑than‑expected advertising results and a cautious holiday outlook also weighed on sentiment despite AWS’s strong growth.
Why it matters
AWS’s rapid expansion and record operating margin underline that Amazon’s core businesses remain robust, particularly in cloud services. However, large AI and technology investments are materially reducing near‑term cash generation, creating investor concern if revenue drivers such as advertising underperform.
This article is not investment advice or a recommendation.
Tags: stock market, Amazon, earnings, investment, artificial intelligence, cloud services, profit, revenue, stock drop, AWS, AI
