Amazon's third-quarter earnings miss estimates as AWS growth hits near five-year high

Compiled from reports by ABC News, The Star and Fortune. See the original articles linked below.

Amazon reported third-quarter results on October 29 that came in below Wall Street expectations, even as its cloud computing arm posted its strongest growth in nearly five years, according to ABC News, which carried a report by The Associated Press.

Profit and sales

The Associated Press, in the version published by ABC News, said Amazon earned $20.69 billion, or $1.89 per share, compared with $21.19 billion, or $1.95 per share, a year earlier. Analysts had forecast $1.97 per share. Revenue rose to $201.94 billion from $180.17 billion, slightly under the $202.2 billion analysts projected, the AP reported.

Fortune reported that the fall in profit partly reflected a gain Amazon booked a year earlier on its investment in Anthropic. Fortune put quarterly revenue at $201.9 billion and described both revenue and profit as missing expectations.

Cloud and advertising

Amazon Web Services sales grew 39.3%, up from 37% in the previous quarter, the AP said. Fortune gave the segment's revenue as $45.98 billion and said the pace was the fastest in years and above Wall Street targets. Reuters, in a report carried by The Star of Malaysia, put AWS revenue at about $46 billion and said it was the quickest growth in nearly five years.

Reuters, as published by The Star, said advertising sales rose 12% to $19.6 billion, missing estimates for the first time in seven quarters. The report said management linked part of the slowdown to Prime Day moving into the second quarter. Fortune also said advertising growth of 12% fell short of estimates.

Spending and cash flow

The Star's Reuters report said free cash flow over the trailing 12 months was negative $42.4 billion, driven by capital expenditure of $77.26 billion in the quarter, roughly $20 billion more than estimates. Fortune gave the quarter's capital expenditure as $75.9 billion, and said free cash flow had swung from a positive $14.8 billion a year earlier to the same negative $42.4 billion figure. The two outlets therefore differ slightly on the quarterly spending total.

According to the AP, Amazon now expects capital spending of about $220 billion this year, mostly for artificial intelligence, up from an earlier plan of $200 billion. The AP said chief executive Andy Jassy stated that capacity would still not fully meet demand this year. Reuters reported that Jassy said spending would be "meaningfully more" next year. Fortune quoted Jassy as calling AI the biggest transformation in our lifetime, and Fortune and Reuters both reported his view that AWS could become a $1 trillion business, within five years according to Reuters and within five to 10 years according to Fortune.

Outlook and market reaction

Amazon guided to fourth-quarter net sales of $240 billion to $247 billion, an increase of 12% to 16%, the AP reported. Analysts had expected about $244.16 billion, the AP said. Reuters described the guidance as slightly below the midpoint analysts anticipated.

The AP reported that shares fell more than 6% in after-hours trading. Reuters, via The Star, said the stock fell as much as 7% in extended trading after closing down 4.3% at $243.79. The Star quoted an analyst as saying operations generated plenty of cash but capital spending swallowed it.

The AP also reported that Amazon plans to hire 300,000 seasonal workers in the United States, up from 250,000 last year, and noted that weaker-than-expected results from Alphabet had already raised wider concern over heavy AI infrastructure spending. Fortune added that Anthropic's IPO filing shows a commitment to spend at least $110 billion on Amazon cloud services through April 2036.

Sources

This article was compiled with AI assistance from the reports listed above and reviewed by GMA before publishing.