Amazon Stock Sinks Over 7% After Q3 Miss, Free Cash Flow Plunges

Amazon (NASDAQ: AMZN) shares sank more than 7% to around $226 in Friday’s premarket trading after the company’s third-quarter earnings and revenue fell short of Wall Street estimates.

The results also showed a sharp deterioration in free cash flow amid heavy spending on artificial intelligence infrastructure, even as growth at Amazon Web Services (AWS) accelerated.

The e-commerce and cloud computing giant reported third-quarter revenue of $201.94 billion, up 12% year over year but below analysts’ $202.21 billion estimate. Earnings of $1.89 per share also missed the $1.97 consensus forecast.

Amazon said Prime Day took place in the second quarter in most large countries in 2026, after falling entirely in the third quarter in 2025. The company estimated that third-quarter year-over-year revenue growth would have been approximately four percentage points higher without the timing shift.

Amazon forecast fourth-quarter revenue of $240 billion to $247 billion. The midpoint of $243.5 billion was slightly below the $244.51 billion analyst consensus compiled by LSEG, although the full guidance range included that estimate.

Amazon’s AI Spending Drives $42.4 Billion Free Cash Flow Outflow

Amazon reported negative free cash flow of $42.4 billion for the 12 months ended September 30, 2026, compared with positive free cash flow of $14.8 billion a year earlier.

The company attributed the deterioration primarily to a $94.8 billion year-over-year increase in purchases of property and equipment, net of sales proceeds and incentives. The additional spending largely reflected investments in AI infrastructure.

Operating cash flow nevertheless increased 29% to $168.3 billion over the same 12-month period, but higher infrastructure spending more than offset the increase.

Amazon maintained its forecast for approximately $220 billion in cash capital expenditures during 2026, with the majority allocated to AWS. During Thursday’s earnings call, CEO Andy Jassy said the company expects to spend meaningfully more in 2027.

Amazon had also announced a €4.8 billion AWS infrastructure expansion in Germany as part of its broader 2027 investment plans.

AWS Growth Accelerates to Fastest Pace in Nearly Five Years

AWS revenue increased 39.3% year over year to $46 billion in the third quarter, accelerating from 37% growth in the previous quarter. The result exceeded the $45.61 billion analyst estimate compiled by LSEG and marked the cloud division’s fastest growth in nearly five years.

For comparison, Microsoft reported 48% Azure revenue growth in its latest quarterly results.

AWS operating income rose to $17.8 billion from $11.4 billion a year earlier. Amazon’s overall operating income increased to $28.1 billion from $17.4 billion, while its operating margin reached a company-record 13.9%.

Despite the higher operating profit, diluted earnings declined from $1.95 per share a year earlier. Amazon attributed the decrease primarily to $9.5 billion in pretax gains from its Anthropic investments recorded in the prior-year quarter.

Jassy said AWS’s backlog of contracted business had reached $578 billion, up from $496 billion at the end of the second quarter. He also projected AWS revenue growth exceeding 40% in both 2027 and 2028.

Amazon shares had already fallen 4.25% to $243.79 during Thursday’s regular trading session, before the earnings release. At $226 in Friday’s premarket trading, the stock was roughly 11.2% below Wednesday’s $254.60 closing price.

Separately, Amazon Tokenized bStocks (AMZNB) was trading at $226.34, down 10.16% over the preceding 24 hours, according to CoinMarketCap. The tokenized instrument trades separately from Nasdaq-listed AMZN, and its 24-hour performance covers a different trading period.