An Amazon redistribution centre in Horn-Bad Meinberg, Germany, in December, 2024.INA FASSBENDER/AFP/Getty Images
Amazon.com AMZN-Q on Thursday reported a massive cash burn in the third quarter and forecast holiday-quarter revenue largely below Wall Street estimates, sending shares lower.
Investors soured on the company, driving shares down nearly 7 per cent in extended trading. The shares had declined 4.3 per cent in regular trading to end at US$243.79.
The Seattle-based retailer expects revenue of between US$240.0-billion and US$247.0-billion in the fourth quarter, compared with analysts’ average estimate of US$244.51-billion, according to data compiled by LSEG. The company said it burned US$42.4-billion on a trailing 12-month basis in the September quarter, driven by capital expenditure of US$77.26-billion, which was some US$20-billion above estimates, according to data compiled by LSEG.
Amazon reported cash burn of US$7.6-billion in the prior quarter, and generated US$14.8-billion in the third quarter of last year.
“The free cash flow looks like the ugly part of the report,” said Dave Wagner, portfolio manager at Aptus Capital Advisors. “Operations generated plenty of cash but their capex just absolutely swallowed it.”
“The trend is pretty steep and pretty negative, and that’s the big thing that is alarming in this report.”
Amazon used AI tool to track risk of unionization in Canadian warehouses, documents show
Like competitors, Amazon has made a huge spending commitment to developing AI software and infrastructure, forecasting US$220-billion in capital expenditures this year. Amazon and Google parent Alphabet have maintained their spending expectations, though Microsoft on Wednesday lowered its own to US$170-billion from US$175-billion.
CEO Andy Jassy told analysts on a conference call he expected capital expenditures to be “meaningfully more” next year, compared with 2026, without elaborating.
Jassy tried to lessen investor concerns following the results. “Our strategy is working and I expect it will for the foreseeable future,” he said. He said AWS could reach a trillion dollars in revenue in as little as five years, adding, “I’m not aware of another retail business approaching Amazon’s revenue size.”
Jesse Cohen, a senior analyst at Investing.com, also pointed to Amazon’s free cash flow and “weak guidance” as reasons for the share decline. “Amazon’s third-quarter report landed as a double disappointment.”
CLOUD BUSINESS DRIVES GROWTH
Revenue at Amazon Web Services rose 39 per cent to US$46-billion in the third quarter ended September, compared with analysts’ estimate for a 38.2 per cent increase to US$45.61-billion, according to data compiled by LSEG. AWS revenue recorded a 37 per cent jump in the second quarter.
The company also maintained its annual capital spending forecast of about US$220-billion.
Advertising sales were another disappointment, rising just 12 per cent to US$19.6-billion from a year earlier, below the 18 per cent estimate from LSEG – the first time they missed analyst estimates in seven quarters. The results marked much slower growth than the second quarter’s 26 per cent or the 2025 third quarter’s 22 per cent.
Jassy, nonetheless, said he was “pleased” with advertising sales and said moving the Prime Day discount event to the second quarter had impacted overall ads in the period. He forecast a return to “high teens” ad sales growth in the current quarter.
The downbeat fourth-quarter outlook signals US retailers could face pain in the holiday season, as consumers tighten shopping budgets amid higher gasoline prices and the rising cost of living.
Still, recent industry forecasts predict holiday sales will accelerate from last year. The National Retail Federation earlier this month predicted a 4.2 per cent jump in total US holiday season sales.
While retail sales account for the majority of Amazon’s revenue, investor focus has shifted sharply toward its cloud computing business, Amazon Web Services, in recent years, as the tech company spends heavily to build out data centres and compete in the global AI race.
Amazon’s cloud unit grew at its fastest pace in nearly five years.
At its e-commerce business, Amazon has been rolling out faster delivery services globally and expanding to more rural areas in the US to draw more shoppers.