Amazon’s latest earnings report delivered strong growth in its cloud business but failed to ease Wall Street’s concerns about the cost of its AI expansion. Amazon stock price fell after the company reported third-quarter revenue and earnings below analyst expectations, alongside a weaker-than-expected holiday-quarter sales outlook.
AWS revenue growth accelerated to its fastest pace in nearly five years, yet investors focused on the other side of the equation: Amazon’s rapidly expanding infrastructure bill and mounting pressure on free cash flow. The question for AMZN investors is no longer just how quickly AWS can grow, but how much capital that growth will require.
Amazon Earnings Miss Estimates as AI Investment Drives Cash Outflow
Amazon reported third-quarter net sales of $201.94 billion, up 12% from a year earlier. Diluted earnings per share came in at $1.89, below analyst expectations of approximately $1.97. Net income declined to $20.69 billion from $21.19 billion in the year-ago quarter.
The headline revenue growth also requires some context. Amazon said the shift in Prime Day timing affected the year-over-year comparison, as the event took place in the second quarter for most major markets this year, rather than entirely in the third quarter as it did in 2025. Excluding this calendar effect, the company estimated that third-quarter sales growth would have been around four percentage points higher.
AWS was the standout performer. Revenue increased 39.3% to $46 billion, its fastest growth in nearly five years. AWS operating income reached $17.8 billion, up from $11.4 billion a year earlier. Amazon also reported record overall operating income of $28.1 billion and an operating margin of 13.9%.
Management expects capital expenditure to reach approximately $220 billion in 2026, with CEO Andy Jassy indicating that spending will be meaningfully higher in 2027. Meanwhile, Amazon’s fourth-quarter revenue forecast of $240 billion to $247 billion came in below the midpoint of Wall Street expectations.
Amazon Stock Price Analysis: Can AMZN Defend the $240 Support?
Amazon’s stock chart structure has weakened after the latest sell-off, bringing the stock toward the $240–$245 support zone. This area is the immediate level to watch as buyers attempt to prevent the correction from extending. A sustained hold above this zone could allow AMZN to consolidate and attempt a recovery toward $250–$260. However, the stock would need to regain buying momentum before challenging the broader resistance area near $280.
The downside risk increases if AMZN breaks decisively below $240. Such a move would weaken the existing support structure and put the rising trendline under pressure, potentially opening the way for a deeper correction.
Can AWS Growth Justify Amazon’s $220 Billion Spending Plan?
AWS remains the strongest part of Amazon’s investment case. Its 39.3% revenue growth demonstrates that demand for cloud infrastructure is accelerating, particularly as businesses expand their AI workloads. Jassy expects AWS revenue growth to exceed 40% in both 2027 and 2028, reflecting management’s confidence in the demand pipeline.
However, the market is increasingly focused on the financial returns from that expansion. Amazon is committing substantially more capital to data centers, computing capacity and related infrastructure, while free cash flow has moved sharply into negative territory.
The next phase of Amazon’s stock performance will depend on whether AWS growth, advertising recovery and retail margins can support the company’s expanding investment base. Strong cloud demand alone may not be enough if capital expenditure continues to outpace cash generation.
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