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Amazon Stock Falls After Q3 Earnings as AI Spending Pressures Free Cash Flow

Steven Levine, Founder of TickerPosts and OpenClassActions.com2 min read
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Illustrative photo by Mike Bird on Pexels

Amazon shares (NASDAQ: AMZN) fell during regular trading Thursday and declined further after the company released third-quarter results after the bell. In its initial after-hours report, the Associated Press said shares were down more than 5%. An Axios snapshot later that evening put the extended-hours decline at 6.5%. Those prices are time-sensitive and may have changed since publication.

The market response followed a quarter with several different signals: AWS growth accelerated, but the company missed revenue and EPS estimates, reported negative trailing free cash flow and gave a holiday-quarter sales range whose midpoint was below consensus.

AWS growth was strong; total results missed estimates

Amazon reported third-quarter net sales of $201.9 billion, up 12% year over year. FactSet analysts had expected about $202.2 billion. Diluted EPS was $1.89, compared with a $1.97 estimate, according to AP. Operating income reached $28.1 billion, and Amazon said its 13.9% operating margin was a record.

AWS net sales rose 39.3% to $46.0 billion, the fastest growth rate in nearly five years, according to the company's release. Amazon attributed part of the retail revenue comparison to Prime Day moving from Q3 to Q2 in most large countries this year.

AI investment pushed trailing free cash flow below zero

For the twelve months ended September 30, Amazon reported $168.3 billion in operating cash flow and a $42.4 billion free-cash-flow outflow. The company said the change was driven primarily by higher purchases of property and equipment, which it said reflected investment in AI. Capital expenditures remained forecast at approximately $220 billion for 2026.

This is a trailing-year measure, not a single-quarter cash loss. It also sits beside higher operating cash flow and record operating margin. The investor question is how quickly the new data-center capacity produces enough revenue and cash generation to support the investment.

Holiday guidance fell just below the analyst midpoint

Amazon forecast fourth-quarter sales of $240 billion to $247 billion. The midpoint is $243.5 billion, compared with the $244.16 billion analyst estimate cited by AP. The company projected operating income of $28.5 billion to $33.5 billion and repeated its full-year capital-spending estimate.

For AMZN investors, the next report will show whether AWS growth and holiday demand convert into cash after the current infrastructure buildout. Today's share-price decline does not answer that question.

Published October 29, 2026. This article is informational and is not investment advice. After-hours prices can change quickly.

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