Amazon Reports Slow Third-Quarter Sales and Cautious Fourth-Quarter Forecast Amid Heavy AI Spending
“The opportunity remains extraordinary,” Amazon CEO Andy Jassy told investors on a conference call regarding the company’s fiscal third-quarter earnings report. Amazon offered a cautious sales outlook for the fourth quarter encompassing the critical holiday shopping period, after delivering fiscal third-quarter results that came up short of Wall Street analysts’ expectations.
The Seattle-based technology giant reported net income of $20.69 billion, or $1.89 per share, for the three months ended September 30. That compares with $21.19 billion, or $1.95 per share, in the same period a year ago. Net sales rose 12% to $201.94 billion, compared with $180.17 billion in the year-ago period. FactSet analysts had expected earnings of $1.97 per share on sales of $202.2 billion.
Amazon stated that sales growth took a hit from a calendar shift for its Prime Day sales event. In 2025, Prime Day fell entirely within the fiscal third quarter, whereas this year it fell in the second quarter for most large countries, including the United States. Without this timing difference, sales growth compared to the prior year would have risen by roughly 4%, or 400 basis points.
Amazon Web Services Delivers Record Cloud Growth
Despite missing overall earnings expectations, Amazon posted strong sales growth in its cloud computing division, Amazon Web Services. AWS sales rose 39.3% to $46 billion during the quarter ended September 30, outpacing the 37% growth rate recorded in the previous quarter. The company noted that this marked the fastest growth rate for the unit in nearly five years.
Chief Executive Andy Jassy expressed strong optimism for the cloud division’s future trajectory. He told investors that he expects AWS sales to increase by 40% in each of the next two years, projecting that the unit will ultimately expand into a $1 trillion-plus business over the next five to ten years.
To support this expansion, Jassy stated that Amazon is installing an artificial intelligence chip about every 14 seconds, describing the deployment as happening “almost as fast as we installed capacity.” He added that enterprise customers are “gobbling it up.”
Capital Spending Surges as Cash Burn Worries Investors
Investors reacted cautiously to the heavy capital expenditures required to fuel artificial intelligence infrastructure. Amazon shares dropped 7% in after-market trading following the earnings release as markets focused on core operations and the cash drain tied to AI investments. According to the company’s financial disclosures, Amazon reported a free cash flow loss of $42.4 billion for the trailing 12 months.
Jassy reaffirmed that Amazon expects to spend $220 billion in capital this year, primarily to construct AI data centers. In July, management raised its annual technology capital spending plan by 10% to $220 billion, an increase that includes investments in robotics, semiconductors, and satellites. This figure is up from the $200 billion investment plan announced in February and surpasses the $128 billion spent on capital projects across all of last year.
These massive outlays mirror broader trends across the technology sector. Alphabet reported Wednesday that property and equipment purchases topped $51 billion during its summer quarter, contributing to higher cash burn and a subsequent drop in its stock price as analysts flagged weaker-than-expected growth.
Data Center Expansion Sparks Local Community Investments
The rapid expansion of physical data centers has drawn increased scrutiny and backlash from local politicians and residents. In response, major technology companies have pledged to maintain greater transparency and invest directly in host communities.
Earlier this month, Amazon made public its plans to inject upwards of $1 billion over a five-year period into the areas hosting its data centers. The funding is earmarked for local education, job training, water and energy preservation projects, and other regional priorities.
Fourth-Quarter Guidance and Delivery Speed Improvements
For the upcoming fourth quarter, which covers the holiday shopping season, Amazon expects net sales to range between $240 billion and $247 billion. This represents a projected increase of 12% to 16% compared with the same period a year ago. Wall Street analysts had previously anticipated fourth-quarter sales of $244.16 billion.
Parallel to its data center expansion, Amazon has accelerated order delivery times through a combination of robotics, artificial intelligence technology, and streamlined warehousing. Executives noted that faster delivery speeds have driven growth in the company’s grocery business, encompassing fresh and perishable goods. Enhanced delivery speeds also helped Amazon temporarily surpass Walmart in February to become the nation’s largest company by revenue.
Frequently Asked Questions About Amazon’s Earnings
Why did Amazon’s shares drop in after-market trading despite strong cloud growth?
Shares fell 7% because overall third-quarter earnings missed Wall Street analyst expectations and investors grew concerned over heavy cash burn. Amazon reported a free cash flow loss of $42.4 billion over the trailing 12 months as it pours capital into artificial intelligence data centers.
How much capital does Amazon plan to spend on technology in the current fiscal year?
CEO Andy Jassy confirmed that Amazon expects to spend $220 billion in capital this year. This budget covers infrastructure outlays for AI data centers, robotics, semiconductors, and satellites.
What was the growth rate for Amazon Web Services in the third quarter?
AWS sales rose 39.3% to $46 billion during the quarter ended September 30, up from a 37% growth rate in the previous quarter. Company executives called it the fastest growth rate for the unit in nearly five years.
What sales range did Amazon projected for the fourth quarter?
Amazon projected that fourth-quarter net sales will fall between $240 billion and $247 billion. This outlook represents a 12% to 16% increase compared to the same period in the previous year.
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