Amazon Shares Sink as AI Spending Overshadows Cloud Growth
· Business · Fortune, Reuters
Amazon reported Q3 revenue of $201.9 billion, slightly missing expectations, and profit of $20.7 billion, which fell short of forecasts and declined from a year ago, primarily due to gains from its Anthropic investment in the prior year. AWS, Amazon's cloud unit, saw sales rise 39.3% to $45.98 billion, exceeding Wall Street targets, with strong demand for AI-related cloud services. Despite the cloud strength, Amazon is spending unprecedented amounts on AI data centers, pushing free cash flow to negative $42.4 billion over the past year, and reiterated a $220 billion capital expenditure target for 2026. Shares initially dropped 5% in after-hours trading as investors expressed concern over the heavy AI infrastructure spending and weakening performance in non-cloud businesses.
Why it matters
Amazon's escalating AI spending risks tightening margins and affecting investor confidence, potentially impacting the broader tech sector and Indian businesses relying on cloud services, while the heavy capital outlay may strain near-term profitability. The trend reflects a high-stakes race among tech giants to dominate AI infrastructure amid rising demand.
Read the original report — Fortune
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