TLDR
- Amazon (AMZN) stock fell 4% Thursday and was down about 7% in Friday premarket trading at $227.56.
- Q3 earnings per share were $1.89 versus $1.97 expected, and sales of $201.9 billion missed the $202.2 billion forecast.
- AWS revenue rose 39% to $46 billion, beating estimates, and Amazon sees growth “north of 40%” in 2027 and 2028.
- Q4 operating income guidance of $31 billion at the midpoint is below the $33.2 billion analysts expected.
- Ad growth slowed to 12% from 26%, and free cash flow was negative for a third straight quarter.
Amazon (AMZN) stock fell 4% on Thursday after its third-quarter report missed on both sales and earnings. The slide continued Friday, with the stock down about 7% in premarket trading at $227.56.
Amazon had been up 5.6% for the year heading into the report. That gain is now under pressure.
Earnings per share came in at $1.89, below the $1.97 analysts expected and the $1.95 posted a year ago. Net sales rose 12% to $201.9 billion, just under the $202.2 billion forecast.
It is the second big tech name to stumble in as many days. Alphabet (GOOGL) dropped about 13% on Wednesday after Google Search slowed.
Retail and ads come up short
North America sales rose 6% to $112.9 billion, against a $113.2 billion estimate. International sales grew 5% to $43.1 billion, roughly half a billion dollars light.
Online store sales hit $68.47 billion, while Wall Street wanted $69.6 billion. That was the clearest gap in the report.
Advertising brought in $19.6 billion. Growth slowed to 12% from 26% the quarter before.
Amazon said it saw some of this coming. Prime Day moved into the second quarter to avoid a clash with the FIFA World Cup in July.
The company also pointed out that Q3 had no ad revenue from Prime’s NBA broadcasts. The second quarter did.
AWS beats, but guidance disappoints
AWS was the bright spot, with revenue up 39% to $46 billion. Analysts had expected about $45.68 billion.
Management said AWS can grow revenue “north of 40%” each year in 2027 and 2028. It also called the unit a possible “trillion-dollar revenue business” in five to 10 years.
The buildout has a price tag. Free cash flow was negative for a third straight quarter, and 2026 capital spending is still pegged at $220 billion.
Jake Behan of Direxion said faster AWS growth makes the AI spending easier to justify, but it does not make the cost go away. Cash flow, he said, is still feeling the strain.
The fourth-quarter outlook did not help. Amazon sees operating income of $31 billion at the midpoint, versus $33.2 billion expected, and net sales of $240 billion to $247 billion against a $244.5 billion consensus.
Anthropic is also in focus. Its IPO prospectus, released Monday, mentioned Amazon and AWS 166 times, and flags a $110 billion, 10-year AWS contract as the biggest risk.
Amazon will hold a greater-than-5% stake in Anthropic after the IPO. AMD and Broadcom (AVGO) each slipped about 2% on Thursday.
As of Friday premarket, Amazon stock was trading near $227.56, down roughly 7% on the day.
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