TLDR
- Amazon (AMZN) missed Q3 estimates, with EPS of $1.89 versus $1.97 expected and sales of $201.9 billion.
- The stock fell 4% on Thursday and was down about 7% in Friday premarket trading near $227.56.
- AWS revenue rose 39% to $46 billion, beating estimates, and Amazon sees growth “north of 40%” in 2027 and 2028.
- Q4 operating income guidance of $31 billion at the midpoint came in below the $33.2 billion analysts wanted.
- Advertising growth slowed to 12% from 26% the prior quarter, and free cash flow was negative for a third straight quarter.
Amazon (AMZN) stock dropped 4% on Thursday after the company missed Wall Street targets for its third quarter. The decline deepened on Friday, with the stock down about 7% in premarket trading to $227.56. Amazon had been up 5.6% for the year heading into the report.
The company earned $1.89 a share, down from $1.95 a year ago and below the $1.97 analysts expected, per FactSet. Net sales rose 12% to $201.9 billion, just short of the $202.2 billion forecast.
AMAZON $AMZN Q3’26 EARNINGS HIGHLIGHTS
🔹 Revenue: $201.9B (Est. $202.3B) 🟡; +12% YoY
🔹 EPS: $1.89 (Est. $1.96) 🔴; w/ Anthropic gain
🔹 Operating Income: $28.1B (Est. $26.2B) 🟢
🔹 AWS Sales: $46.0B (Est. $45.4B) 🟢; +39% YoY
🔹 CapEx: $77.3B (Est. $57.47B) 🟢Q4 Guide:
🔹… pic.twitter.com/bVUn5vRuOl— Wall St Engine (@wallstengine) October 29, 2026
The miss followed a similar story at Alphabet (GOOGL), which fell about 13% on Wednesday after its Google Search business slowed. Both companies are pouring money into AI, and both got punished for softness elsewhere.
Retail and ad sales fall short
North America sales grew 6% to $112.9 billion, shy of the $113.2 billion estimate. International sales rose 5% to $43.1 billion, about half a billion dollars below forecasts.
Online store sales came in at $68.47 billion against expectations of $69.6 billion. That gap was the clearest sign of trouble in the retail business.
Advertising brought in $19.6 billion. Annual growth in that segment slowed to 12% from 26% in the second quarter.
Amazon said some of this was expected. Prime Day moved into the second quarter to avoid a clash with the FIFA World Cup in July. The company also pointed out that the third quarter had no ad revenue from Prime’s NBA broadcasts, unlike the second.
AWS beats, but cash flow stays negative
Amazon Web Services was the bright spot. Revenue jumped 39% from a year ago to $46 billion, above the $45.68 billion analysts had penciled in.
Management said it believes AWS can grow revenue “north of 40%” each year in 2027 and 2028. It also called the unit a possible “trillion-dollar revenue business” within five to 10 years.
The cost of that growth is still showing up on the balance sheet. Free cash flow was negative for a third straight quarter because of the AI data center buildout.
Amazon held its 2026 capital spending estimate at $220 billion. That figure has been a sore spot for some investors.
Jake Behan of Direxion said AWS acceleration makes the AI investment easier to justify, but it does not make the cost disappear. He added that free cash flow remains under heavy pressure.
The fourth-quarter outlook did not help. Amazon expects operating income of $31 billion at the midpoint, well under the $33.2 billion analysts had expected. Net sales are forecast between $240 billion and $247 billion, versus a consensus of $244.5 billion.
Anthropic is also on investors’ minds. Its IPO prospectus, released Monday, mentioned Amazon and AWS 166 times, and it lists a $110 billion, 10-year AWS contract as the biggest risk.
Amazon will also hold a greater-than-5% stake in Anthropic after the IPO. Shares of AMD and Broadcom (AVGO) slipped about 2% each on Thursday.
As of Friday premarket, Amazon stock was trading near $227.56, down roughly 7% on the day.
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