On Thursday, Amazon released its earnings report for the third quarter, which fell short of analysts’ forecasts for both revenue and earnings per share. Investors were also alarmed by other concerning figures in the report, particularly regarding the significant amount of cash the company is spending.
However, there was a standout performance from Amazon Web Services, the company’s cloud division, which surpassed revenue expectations and experienced an impressive 39% growth compared to the same quarter last year.
Here are the key figures:
- Net sales rose by 12% to reach $201.9 billion, although analysts had anticipated $202.2 billion, according to data from FactSet.
- Diluted earnings per share were reported at $1.89, falling short of the expected $1.97.
- Revenue from AWS was $45.98 billion, exceeding analysts’ expectations of $45.29 billion. Additionally, AWS operating income grew to $17.8 billion, compared to $11.4 billion in the same quarter the previous year.
The most notable drawback in the report was a dramatic drop in free cash flow, which turned negative at $42.4 billion for the past 12 months. This indicates that Amazon is spending significantly more cash than it is generating, contrasting sharply with the positive free cash flow of $14.8 billion for the year ending September 30, 2022.
The company attributed this excessive spending primarily to its investments in artificial intelligence. With just one quarter remaining in the fiscal year, Amazon reaffirmed its expectation of total cash capital expenditures reaching approximately $220 billion for 2026.
To provide further context, Amazon forecasts fourth-quarter net sales to fall between $240 billion and $247 billion — traditionally the busiest period due to the holiday season. This suggests that the company anticipates spending nearly as much on capital expenditures, mostly focused on AI, for the entire year as it expects to earn from sales in the fourth quarter alone.
