Amazon (AMZN) Stock Plunges as AI Spending Concerns Mount

TLDR

• Amazon stock dropped more than 7% in Friday’s premarket trading following weaker-than-expected third-quarter earnings.
• Amazon reported $201.94 billion in quarterly revenue, missing Wall Street’s $202.31 billion estimate.
• Earnings per share reached $1.89, falling below analysts’ expectations of $1.97.
• AWS revenue increased 39% to $46 billion, marking its fastest annual growth in nearly five years.
• Amazon expects approximately $220 billion in capital spending in 2026, with higher spending planned for 2027.

Amazon (AMZN) stock fell more than 7% in Friday’s premarket trading after third-quarter earnings missed forecasts and investors questioned the cost of its artificial intelligence expansion. The decline followed a 4.25% drop Thursday. Technology shares also weakened, with Nasdaq futures down more than 2% as investors reviewed spending plans across major companies.

Amazon.com, Inc., AMZN

Amazon Stock Falls After Earnings Miss

Amazon reported quarterly revenue of $201.94 billion, up 12% from a year earlier but below Wall Street’s $202.31 billion estimate. Earnings reached $1.89 per share, missing the $1.97 forecast. Operating income climbed to $28.1 billion from $17.4 billion a year earlier.

The latest results followed Amazon’s decline ahead of its earnings release on Thursday. The company expects fourth-quarter sales between $240 billion and $247 billion, compared with analysts’ $244.51 billion estimate.

Cloud Growth Faces Heavy Spending

Amazon Web Services revenue increased 39% to $46 billion, its fastest pace in almost five years. Chief Executive Andy Jassy expects annual AWS growth to exceed 40% in both 2027 and 2028.

Amazon plans about $220 billion in capital spending this year. Jassy said spending would be “meaningfully more” in 2027. Free cash flow reached a $42.4 billion outflow over the past 12 months, compared with a $14.8 billion inflow a year earlier.

Cloud competitors are expanding too. Microsoft reported 40% Azure growth in its latest earnings update. Evercore ISI analyst Mark Mahaney said AWS margins and its backlog remain important measures for investors.

Analysts Question Retail Outlook

Blue Line Capital’s Bill Baruch said investors need clearer guidance on when Amazon’s spending will peak. He pointed to its roughly $496 billion AWS backlog and demand for Trainium chips as factors to watch in the coming reporting periods.

North American sales grew 6%, while international revenue increased 5%. Maxim Group analyst Tom Forte warned that higher gasoline prices could restrain holiday shopping. He maintained a Buy rating and a $350 price target despite concerns about consumer spending.

Delivery Competition Adds Pressure

Forte also raised concerns about delivery competition. DoorDash recently announced a proposed $17 billion Instacart acquisition, which would expand its grocery business if regulators and shareholders approve the transaction. Deepwater Asset Management’s Gene Munster warned that personalized AI shopping assistants could challenge Amazon’s retail business from late 2027.

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