Amazon Third-Quarter Results Miss Views as AI Spending Drives Negative Cash Flow

05:16 PM EDT, 10/29/2026 (MT Newswires) -- Amazon's (AMZN) third-quarter results missed Wall Street's estimates as a massive ramp in artificial intelligence spending sent free cash flow deep into negative territory. Net income declined to $1.89 a share for the September quarter from $1.95 a year earlier, Amazon said late Thursday. The consensus on FactSet was for an increase to $1.97. Net sales climbed 12% to $201.94 billion, but missed the Street's view of $202.22 billion. Free cash flow plunged to negative $42.36 billion for the trailing 12 months, compared with an inflow of $14.79 billion a year earlier, Amazon said. The cash burn was driven by a $94.8 billion increase due to AI-linked purchases of property and equipment. The company's shares declined 6.5% in after hours, and had gained 5.6% through market close Thursday. Alphabet (GOOG, GOOGL) said late Wednesday that its free cash flow turned negative year-on-year in the third quarter, at $9.07 billion, while the outflow deepened sequentially. Microsoft (MSFT) reported free cash flow of $18.6 billion in its first quarter. Amazon maintained its 2026 capital expenditure outlook at about $220 billion. Sales at the Amazon Web Services cloud-computing unit increased 39% to $45.98 billion. BofA Securities recently expected AWS third-quarter revenue of $46.21 billion. Google cloud revenue more than doubled year over year to $30.71 billion in the third quarter, while Microsoft's cloud computing business, Azure, saw a 48% jump in the first quarter. AWS is projected to post revenue growth rates of more than 40% in both 2027 and 2028, Amazon Chief Executive Andy Jassy said in a statement. "Our broader selection and speedier delivery are helping us capture more retail market segment share with improving margins," Jassy said. "There has never been a trillion dollar revenue business, and we may have two of them in the next (five to) 10 years." BofA had projected an upside to Amazon's third-quarter estimates, citing AWS strength amid growing enterprise inference demand, according to a note emailed Monday. For the fourth quarter, Amazon expects net sales between $240 billion and $247 billion, while the Street is looking for $244.17 billion. Diesel prices hit a record high in late September, and that could be a headwind to Amazon's fourth quarter, BofA analyst Justin Post said in the note. Fuel costs could create an incremental $1 billion year-over-year headwind for first-party shipping in the fourth quarter, while potentially squeezing third-party margins if surcharges fail to offset the increase, Post added. Microsoft reported better-than-expected first-quarter results late Wednesday, while Alphabet's third-quarter results missed Wall Street's estimates despite AI-led cloud revenue growth.