Amazon shares fell 7% in premarket trading Friday after the company reported third-quarter results that missed Wall Street expectations on both revenue and earnings, with a massive AI infrastructure bill pushing its free cash flow to negative $42.4 billion over the trailing twelve months. Intel, which also reported after Thursday's closing bell, dropped 25% premarket and sank as much as 29% during the session, according to CNBC, after issuing weak fourth-quarter guidance. For more context on this story, see our ongoing latest AI developments
The twin disappointments extend a bruising week for Big Tech. The Nasdaq had already closed 1.6% lower on Thursday after Alphabet's own underwhelming report, and futures tied to the Nasdaq were down 2.6% ahead of Friday's open, with S&P 500 futures off 1.1%, per Investopedia.
The Quarter in Numbers
Amazon posted earnings per share of $1.89 on revenue of $201.9 billion, according to figures tallied in Yahoo Finance's earnings live blog, short of the Bloomberg-compiled analyst consensus of $1.97 and $202.25 billion respectively. In the same quarter last year the company earned $1.95 per share on $180.16 billion in revenue. Management noted that Prime Day's shift from the third quarter into the second this year cost roughly 400 basis points of year-over-year growth.
AWS Keeps Accelerating
The paradox at the heart of the selloff is that Amazon's cloud business is growing faster than it has in five years. Reuters reported that AWS revenue rose 39% year over year to $46.0 billion, beating the $45.68 billion analysts expected and marking its fastest expansion since 2021. CEO Andy Jassy put AWS's annualized revenue run rate at $184 billion and projected growth above 40% in both 2027 and 2028, backed by a backlog he pegged at $578 billion. TechCrunch noted that Jassy has said AWS will eventually be a trillion-dollar business.
Jassy also argued the market is underestimating how early the cloud transition remains. "It's important to remember that the vast majority of global IT spend, about 85%, is still on-premises, and we're in a 10-year cycle where that equation will flip to the cloud," he said on the earnings call. He added that Fortune 500 spending on Amazon's Bedrock inferencing service grew nearly 7x year over year, with total Bedrock token volume up almost 17x.
The Cash Burn Problem
What spooked investors was the cost of that growth. Amazon's free cash flow over the twelve months ended September 30 came in at negative $42.4 billion, compared with positive $14.8 billion a year earlier, as capital expenditures overwhelmed operating cash generation. The company reiterated its expectation of roughly $220 billion in cash capital expenditures for 2026 and told investors to expect "meaningfully more" spending in 2027. "On the CapEx involved to grow the way we're talking about, it's meaningful," Jassy conceded.
Guidance Comes Up Short
The forward outlook did little to calm nerves. Amazon guided fourth-quarter net sales to a range of $240 billion to $247 billion, whose $243.5 billion midpoint fell below the $244.5 billion analysts anticipated, per Yahoo Finance. Projected operating income of $28.5 billion to $33.5 billion similarly trailed the $32.99 billion consensus at the midpoint. The live blog noted Amazon has issued operating income forecasts below consensus estimates for eight consecutive quarters, a habit that has trained investors to brace for disappointment even when the underlying business performs.
Chip and Crypto Complex Selloff
Intel's plunge was the single sharpest move of the session after the chipmaker issued weak fourth-quarter guidance, but the pain spread across the semiconductor complex. Advanced Micro Devices tumbled 9% premarket, Micron and Marvell each dropped 6%, and Nvidia and Broadcom slipped more than 3%, driving the iShares Semiconductor ETF down more than 6%, according to Investopedia. Bitcoin slid to about $77,400 from a high near $82,000 the previous day, dragging crypto-linked stocks like Strategy, Coinbase and Robinhood down 6% to 7%.
Not everything sold off. Walmart rose 2% and has climbed 16% over the past month, with 24/7 Wall St. describing the retail giant as a defensive counterweight to the AI-spending trade. Meta fell 2% and Alphabet dipped about 1%, extending Thursday's losses.
What Analysts Are Saying
Reactions split along the familiar bull-bear fault line. TD Cowen called the selloff excessive and kept a Buy rating on Amazon while trimming its price target to $340 from $350, while MoffettNathanson raised its target to $357 from $315, according to 24/7 Wall St. Bank of America, which lowered its target to $317, noted that investor expectations for AWS growth had run as high as 42% — one reason a 39% print, objectively strong, still disappointed. Amazon's advertising business grew 12% year over year, a sharp deceleration from 26% the prior quarter, adding a second locus of concern beyond capital spending.
For Amazon, the debate now is whether accelerating AWS growth and a $578 billion backlog justify a cash burn that could persist into 2027. Bulls point to Jassy's projection of 40%-plus cloud growth for the next two years; bears note that the same AI buildout that powers the backlog is what drained $42.4 billion of cash. Both sides, for now, agree on the numbers — they just disagree on what they mean.
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