Amazon's stock price fell by 6% due to its quarterly financial report showing a rare "double disappointment," while the tech industry as a whole also saw a decline.
Amazon Web Services ( AWS ) reported a net sales growth of 39.3%, exceeding the expected 37.8% and marking the fastest growth rate in five years.
As artificial intelligence reduces profit margins and erodes free cash flow, market uncertainty increases, but CEOs remain confident about an annualized operating rate of $184 billion.
Amazon Financial Report Summary
Amazon announced revenue of $20.19 billion for the third quarter of 2026. Although this represents a year-over-year increase of 12%, it was slightly lower than analysts' forecast of $20.226 billion. Adjusted earnings per share were $1.89, also falling short of the market's expectation of $1.97. Net profit reached $20.7 billion, with operating profit at $28.1 billion, and the operating margin reached a record high of 13.9%.
A major highlight is that the growth of Amazon Web Services ( AWS ) exceeded analysts' expectations. The net sales of this cloud computing division amounted to $46 billion, a year-on-year increase of 39.3%, which not only surpassed the market's estimate of 37.8% but also represented the best growth rate in five years.
In the field of artificial intelligence, Amazon maintains its capital expenditure target of $220 billion for 2026. The company plans to use these funds for the large-scale construction of AI data centers, and part of the capital will also be used to purchase custom hardware to meet the continuously growing demand for AI cloud services.
The company stated that its AI proxy deployment platform Amazon Bedrock AgentCore attracted tens of thousands of customers in the third quarter, with the number of proxies deployed doubling compared to the same period last year. Over 400 customers used Alexa for shopping, and the volume of interaction increased by 570% year-on-year.
Doubts about the expenditure of AI
Amazon CEO Andy Jassy stated that investments in AI infrastructure are yielding significant returns, and added that the company is currently tracking an annualized operating rate of $184 billion. The company recorded capital expenditures of $77.3 billion, part of which was used for AI research and development.
However, his statements have not alleviated the current concerns prevalent in the tech industry. In addition to the recent heavy selling of Chinese AI stocks, investors' anxiety is also rising as American tech giants are pursuing AI development at the cost of short-term profit margins and free cash flow; Amazon's free cash flow is negative by $42.4 billion.
Operation Optimization
Amazon stated that it has laid off 250 software employees in order to achieve its cost efficiency goals.
At the same time, Prime delivery reached a record high in the third quarter, and the unit sales growth rate of its newer global grocery and pharmacy businesses was three times that of traditional market products.
Forward-looking Guidance
For the holiday quarter, Amazon expects sales to range between $240 billion and $247 billion. This range covers Wall Street's consensus forecast of $244.2 billion, indicating that the company's expectations for retail growth during this period remain stable.
In addition, the company's management expects that the revenue growth rate of AWS will exceed 40% in the fiscal years 2027 and 2028, while the overall year-on-year revenue growth rate is expected to reach 12% to 16%.
Amazon Stock Price and Predictions
During today's trading session, the stock price of AMZN fell by 4.25%, hitting a low of $241.24 during the session.
The cooling prospects in the technology sector also dragged down the Nasdaq Composite Index, which fell by 1.38% on that day, while the S&P 500 Index declined by 0.30%.
