Amazon earnings: AWS grows fastest in 5 years, so why did the stock fall 11%?
Amazon's cloud business grew 39%, its fastest pace in nearly five years, but the stock dropped about 11% after hours. Here's what Amazon reported and why investors were worried.
Amazon reported its third-quarter results on October 29, 2026, the last of the big tech companies to report this week. Its cloud business, AWS, had its best growth in years. But the stock still fell about 11% in after-hours trading. Here’s what happened, in simple terms.
The key numbers
- Revenue: $201.9 billion, up 12% (just below the ~$202.2 billion expected)
- Earnings per share: $1.89, below the $1.96 expected (down from $1.95 a year ago)
- AWS (cloud): $46.0 billion, up 39%, its fastest growth in nearly five years
- AWS profit: $17.8 billion operating income, with a 38.7% margin (up from 34.6%)
- Advertising: $19.6 billion, up 11%
- Online stores: North America sales up 6%, international sales up 5%
The good news: AWS is booming
AWS rents computing power to businesses, and AI has made demand explode. Its 39% growth was the fastest in about five years, and it’s becoming more profitable too. CEO Andy Jassy said he expects AWS to keep growing above 40% in both 2027 and 2028.
So why did the stock fall?
- Profit missed expectations: earnings per share came in below forecasts. Part of the reason: a year ago, Amazon booked a big one-time gain from its investment in Anthropic, which didn’t happen this time.
- Massive spending: Amazon spent $77.3 billion on data centers and equipment in just one quarter, more than double a year earlier. It expects about $220 billion of capital spending in 2026.
- Cash is going out, not coming in: over the last 12 months, Amazon’s free cash flow was negative $42.4 billion. A year earlier it was positive $14.8 billion.
- Slower shopping and ads: retail growth was modest, partly because Prime Day shifted into the previous quarter, and ad growth was softer than hoped.
Investors aren’t doubting AI demand. They’re asking how long Amazon can keep spending this much before the profits catch up.
What Amazon expects next
- Holiday quarter sales: $240–247 billion (12–16% growth)
- Operating income: $28.5–33.5 billion
- Ads: growth expected to speed up to the “high teens” in the holiday quarter
How Amazon compares with Microsoft and Google
All three cloud giants showed strong AI demand this week: Azure +48%, Google Cloud +103% and AWS +39%. But only Microsoft’s stock rose. Read the full story: Big Tech earnings week explained.
ByteTidings does not give financial advice.
Frequently asked questions
Did Amazon beat earnings?
No. Earnings per share of $1.89 missed the $1.96 expected, and revenue was very slightly below forecasts.
How fast is AWS growing?
AWS revenue grew 39% to $46.0 billion, its fastest growth in nearly five years.
Why did Amazon stock drop after earnings?
Mainly because profit missed expectations, spending on AI data centers was very high, and free cash flow turned negative.
How much is Amazon spending on AI?
Amazon expects about $220 billion in capital spending in 2026, mostly for data centers and AI infrastructure.
