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Can AWS growth help Amazon shares rebound from the post-earnings selloff?

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In short

The company's third-quarter revenue of $201.9 billion and earnings per share of $1.89 both trailed consensus estimates, triggering a steep drop in after-hours trading. Heavy spending on data centers and AI capacity pushed trailing 12-month free cash flow to negative $42.4 billion, reversing positive cash generation from the prior year. Nevertheless, Amazon Web Services generated $46 billion in revenue with expanding operating income, while the advertising unit brought in $19.6 billion with growth anticipated to reaccelerate.

Key points

  • Disappointing quarterly figures combined with a conservative holiday revenue outlook caus…: Disappointing quarterly figures combined with a conservative holiday revenue outlook caused share prices to tumble over 9% after hours.
  • Heavy capital deployment into artificial intelligence infrastructure has drastically turn…: Heavy capital deployment into artificial intelligence infrastructure has drastically turned the company's free cash flow negative compared to last year.
  • Accelerating performance in cloud computing and expected reacceleration in advertising se…: Accelerating performance in cloud computing and expected reacceleration in advertising serve as key drivers against rising corporate spending.

Sources checked by our analysis pipeline: 1

Amazon shares came under heavy selling pressure in after-hours trading on Thursday, October 29, after the e-commerce giant reported third-quarter earnings and revenue below Wall Street expectations. The stock fell more than 9% following the results, as investors assessed disappointing financial performance, mounting artificial intelligence investments and a cautious outlook for the holiday quarter. (Sources: Reuters, Yahoo Finance, Amazon)

Reuters

2/7

$220 billion AI spending plan raises concerns

Amazon expects capital expenditure to reach approximately $220 billion in 2026, with investments largely directed towards artificial intelligence infrastructure, data centres and cloud computing capacity. The scale of spending has raised concerns about whether returns from AI investments will justify the enormous financial commitment. CEO Andy Jassy also indicated that capital expenditure would be meaningfully higher next year, adding to investor worries over the company's spending trajectory.

ETMarkets.com

3/7

Amazon's revenue and earnings miss estimates

Amazon reported third-quarter revenue of $201.9 billion, up 12% from $180.2 billion in the corresponding period last year. However, the figure fell short of analysts' expectations of approximately $202.25 billion. Earnings per share came in at $1.89,…

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