Amazon reports $42.4B cash outflow as AI spending surges
What's the story
Amazon has reported a massive cash burn in Q3. The Seattle-based retailer said it burned $42.4 billion on a trailing 12-month basis in the September quarter. This was mainly due to capital expenditure of $77.26 billion, some $20 billion above estimates, according to data compiled by LSEG. This has led to a sharp decline in its share price, which fell as much as 7% in extended trading and ended at $243.79 after a regular session decline of 4.3%.
AI investment
Despite financial setback, Amazon doubles down on AI spending
Despite the financial setback, Amazon remains committed to its aggressive spending strategy for artificial intelligence (AI).
The company has forecasted a whopping $220 billion in capital expenditures for this year alone.
CEO Andy Jassy told analysts on a conference call that he expects capital expenditures to be "meaningfully more" next year compared with 2026.
Cloud performance
Cloud computing arm shows strong growth
Despite the overall cash burn, Amazon's cloud computing arm, Amazon Web Services (AWS), continues to show strong growth.
The revenue from AWS rose 39% to $46 billion in Q3, slightly above analysts' estimate of a 38.2% increase to $45.61 billion.
This comes after a whopping 37% jump in AWS revenue during Q2.
Ad revenue
Advertising sales a major disappointment for Amazon
Amazon's advertising sales, however, were a major disappointment as they only rose 12% to $19.6 billion from a year earlier.
This was below the expected 18% growth and marked the first time in seven quarters that the company missed analyst estimates for ad revenue.
The results showed much slower growth than Q2's 26% and Q3 2025's 22%.
Retail forecast
US retailers could struggle during holiday season amid rising costs
The disappointing Q4 outlook indicates that US retailers could struggle during the holiday season as consumers cut back on spending amid rising fuel prices and inflation.
However, recent industry forecasts suggest holiday sales will pick up from last year.
The National Retail Federation earlier this month predicted a 4.2% jump in total US holiday season sales.