Amazon Stock Falls as AI Spending Drives $42.4 Billion Cash Burn

Amazon stock fell Friday morning after the company showed how much its artificial intelligence buildout is costing: a $42.4 billion free cash outflow over the past year, even as its cloud business grew at the fastest pace in nearly five years. The shares had already dropped 4.3% in Thursday’s regular session before the report.

The selloff eased after the open. Amazon fell more than 6% in extended trading Thursday, according to CNBC, and opened at $232.54 on Friday before recovering part of the loss by mid-morning.

What happened

Amazon said net sales rose 12% to $201.9 billion in the quarter ended Sept. 30, up from $180.2 billion a year earlier, in its third-quarter results release. Excluding currency swings, sales grew 13%. The company said moving Prime Day into the second quarter in most large countries held growth back by roughly 400 basis points.

Net income was $20.7 billion, or $1.89 a diluted share, compared with $21.2 billion, or $1.95, a year earlier. Amazon said the decline was driven mainly by $9.5 billion in pre-tax gains from its Anthropic investments in the 2025 quarter. Analysts polled by LSEG had expected $1.96 a share on revenue of $202.31 billion, CNBC reported.

Operating income jumped to $28.1 billion from $17.4 billion, and the 13.9% operating margin was the highest in company history, Amazon said.

AWS accelerates

Amazon Web Services sales climbed 39% to $46.0 billion, putting the unit on a $184 billion annualized revenue run rate. AWS operating income rose to $17.8 billion from $11.4 billion. CNBC said the growth rate was the highest since the fourth quarter of 2021 and topped the $45.29 billion StreetAccount consensus.

“Our AWS investment in functionality and infrastructure is working,” Jassy said in the release, adding that Amazon projects AWS revenue growth of more than 40% in both 2027 and 2028.

Retail and ads cool

North America segment sales rose 6% to $112.9 billion, and International sales gained 5% to $43.1 billion. Online store sales grew just 2% to $68.5 billion. Advertising services revenue rose 11% to $19.6 billion, or 12% excluding currency, which Amazon tied to Prime Day timing. StreetAccount had expected $20.82 billion, CNBC said.

Why the market moved

The pressure point was cash. Operating cash flow over the trailing 12 months rose 29% to $168.3 billion, but purchases of property and equipment jumped by $94.8 billion from a year earlier, mainly for AI, the company said. That turned a $14.8 billion free cash inflow a year ago into a $42.4 billion outflow, the second straight quarter in negative territory.

Third-quarter purchases of property and equipment totaled $77.3 billion, up from $35.1 billion a year earlier and well above the $58.7 billion FactSet estimate cited by CNBC. Reuters put the overshoot at about $20 billion, based on LSEG data.

“Operations generated plenty of cash but their capex just absolutely swallowed it,” Dave Wagner, portfolio manager at Aptus Capital Advisors, told Reuters.

Guidance added to the caution. Amazon expects fourth-quarter net sales of $240.0 billion to $247.0 billion, up 12% to 16%. Reuters said the $243.5 billion midpoint came in slightly below the $244.51 billion LSEG estimate.

Latest development

Data checked: 10:18 a.m. ET, CNBC real-time quotes.

• Amazon (AMZN): $236.25, down $7.54, or 3.09%. Opened at $232.54, with a low of $229.36 and a high of $240.21. Thursday close $243.79.
• Indexes: Nasdaq Composite down 2.51%, S&P 500 down 1.47%, Dow down 0.68%.

The wider tech selloff gave Amazon little cover. Reuters reported that Intel fell 23% in after-hours trading Thursday on a weak PC outlook, a day when Alphabet posted its worst one-day percentage drop ever. Prices are moving quickly and will change through the session.

Why it matters

Amazon is one of the largest companies in U.S. stock indexes, so its swings ripple through index funds and retirement accounts. Its report was the third Big Tech test of AI spending this week, after Alphabet and Microsoft’s results on Wednesday. Microsoft lowered its 2026 capex forecast to $170 billion from $175 billion, CNBC noted, while Amazon held its roughly $220 billion plan.

The holiday outlook matters beyond Wall Street. Reuters said the softer midpoint hints at pressure on U.S. retailers as shoppers deal with higher gasoline prices and living costs, though the National Retail Federation still forecasts a 4.2% rise in holiday sales.

For readers who want to dig into the numbers themselves, our guide on how to read a corporate earnings report explains free cash flow, guidance and consensus estimates.

What happens next

Jassy told analysts AWS could become a $1 trillion revenue business in five to 10 years and that Amazon plans to offer its Trainium AI chips outside AWS “late in 2027,” CNBC reported. Amazon has not put a number on 2027 spending.

For the current quarter, the company guided operating income to $28.5 billion to $33.5 billion and expects advertising growth to return to the high teens.

What traders are watching

• Recovery case: if Amazon holds above Friday’s early low of $229.36, attention could shift back to AWS growth and record margins.
• Pressure case: a break below that low, or more signs of cash strain across Big Tech, could keep weighing on the Nasdaq.

This article is for information only and is not investment advice.

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Sources

• Amazon.com Announces Third Quarter Results (Amazon Investor Relations)
• CNBC: Amazon posts negative free cash flow of $42.4 billion, holds 2026 capex unchanged, Oct. 29, 2026 (LSEG, StreetAccount and FactSet estimates)
• CNBC: Amazon AWS posts 39% revenue growth as cloud rivals also accelerate, Oct. 29, 2026
• Reuters (via Euronext): Amazon sinks as AI spending eclipses fastest cloud growth in five years, Oct. 29, 2026
• CNBC real-time quotes for AMZN and major indexes, 10:18 a.m. ET Oct. 30, 2026