Amazon Shares Fall as Q3 Miss Overshadows AWS Surge
Amazon shares fell in after-hours trading after Q3 earnings missed expectations, even as AWS grew 39% to $46 billion and spending stayed at $220 billion.
Amazon shares fell in after-hours trading on Thursday, October 29, 2026, after the company reported third-quarter results that missed Wall Street expectations. The drop came even though its cloud business, Amazon Web Services (AWS), grew at its fastest pace in nearly five years. The result adds to a nervous week for big tech investors. A day earlier, Alphabet shares plunged after its own earnings miss, and investors are now asking harder questions about how much profit the huge spending on artificial intelligence will return, and how soon.
What Amazon reported
Amazon reported net sales of $201.9 billion for the quarter ended September 30, up 12% from $180.2 billion a year earlier. Earnings came in at $1.89 per share, below the $1.96 expected by analysts polled by LSEG. Net income fell to $20.7 billion from $21.2 billion a year earlier. Amazon said the profit fall was mainly due to a comparison effect. The year-earlier quarter included a $9.5 billion pre-tax gain on its investment in AI company Anthropic, which did not repeat this year. Operating income was a bright spot. It rose to $28.1 billion from $17.4 billion a year earlier, giving Amazon an operating margin of 13.9%, which the company described as its highest ever.
AWS grows 39% as AI demand surges
AWS was the standout part of the business. Revenue rose 39% to $46 billion, ahead of the 38.2% growth analysts expected, and faster than the 37% growth in the previous quarter. It was the cloud unit's fastest growth in nearly five years. AWS operating income rose to $17.8 billion from $11.4 billion a year earlier. Amazon said AWS is now running at a $184 billion annualized revenue rate, and chief executive Andy Jassy said on the earnings call that the company expects AWS growth above 40% in both 2027 and 2028. The company also reported an AWS backlog of $578 billion in contracted future revenue, more than double a year earlier, showing how much demand there is for AI computing power.
Why investors still sold the stock
Despite the cloud strength, investors focused on three worries. First, the headline miss on sales and profit. Second, a holiday-quarter sales forecast of $240 billion to $247 billion, whose midpoint of about $243.5 billion sits just below the $244.51 billion average analyst estimate compiled by LSEG. Third, the cost of the AI buildout. Amazon reported trailing 12-month free cash flow of negative $42.4 billion, compared with positive $14.8 billion a year earlier. Capital spending in the quarter was $77.26 billion, about $20 billion above estimates, and Amazon held its full-year 2026 capital spending forecast at about $220 billion. Shares had already fallen 4.3% in regular trading to $243.79 before the results, then fell further in after-hours trading as investors digested the forecast and the cash burn.
What happens next
The next test is the holiday shopping season, the most important quarter of the year for Amazon's retail business. Investors will watch whether online sales hold up as households face higher costs, and whether AWS keeps growing above 40% as management expects. The bigger question is the same one hanging over the whole AI boom: how long will it take for hundreds of billions of dollars in data centers and chips to turn into matching profits? Amazon's quarter shows both sides of that story at once - booming demand for AI computing, and a cash bill that is growing just as fast.
Sources
- Reuters - https://www.reuters.com/business/retail-consumer/amazon-projects-fourth-quarter-sales-below-estimates-2026-10-29/ - Associated Press - https://www.lanacion.com.ar/usa/amazons-3q-results-miss-analysts-estimates-but-posts-solid-sales-gains-in-cloud-computing-unit-nid29102026/ - Amazon - https://www.aboutamazon.com/news/company-news/amazon-earnings-q3-2026-report