Amazon Shares Drop Following Fourth-Quarter Guidance and Cash Burn Concerns

Amazon shares declined approximately 7% in after-hours trading following the release of softer-than-expected fourth-quarter sales guidance and heavy cash burn figures. The company reported third-quarter revenue of $201.94 billion, falling slightly short of analysts' expectations of $202.31 billion, while earnings per share came in at $1.89 compared to the anticipated $1.96.

For the upcoming holiday shopping quarter, Amazon projected revenue ranging between $240 billion and $247 billion, with the midpoint failing to meet market estimates. The cautious outlook was compounded by disclosures regarding elevated capital spending dedicated to artificial intelligence infrastructure and data centers.

During the third quarter, Amazon's capital expenditures reached $77.3 billion, surpassing the $58.7 billion expected by analysts. Furthermore, the company's trailing 12-month free cash flow dropped to negative $42.4 billion, while management maintained its full-year 2026 capital spending forecast at $220 billion.

Despite the pressures on near-term cash flow, Amazon Web Services delivered standout performance. AWS revenue surged 39% year-over-year to $45.98 billion, marking the cloud computing division's fastest growth rate since late 2021 and exceeding market forecasts. Operating income for the cloud unit jumped 55% to $17.77 billion.

Addressing investors and analysts, Amazon CEO Andy Jassy expressed strong confidence in the long-term trajectory of the cloud business. He stated that AWS could eventually become a trillion-dollar enterprise and projected that division growth would exceed 40% next year and in 2028, driven by durable demand for artificial intelligence computing over the coming years.

Jassy also addressed retail market dynamics, noting that AI chatbots are not yet diverting retail customers away from traditional shopping platforms. He explained that current chatbot-based shopping experiences remain too limited to materially disrupt Amazon's core e-commerce business, as most consumers continue to prefer direct shopping interfaces.

The broader market also experienced downward pressure during the session as investors reassessed mega-cap technology valuations and the tangible payoffs from massive artificial intelligence spending. The Nasdaq Composite fell 1.38%, reflecting broader tech-sector weakness alongside sharp declines from other major industry players reporting earnings.