Key Highlights

● AWS Revenue reached $45.98 billion, ahead of the $45.29 billion estimate.

● Trailing free Cash Flow was negative $42.4 billion.

● Total revenue of $201.9 billion missed slightly.

● Earnings of $1.89 a share missed estimates.

On paper, Amazon Web Services delivered what investors wanted from Amazon (NASDAQ:AMZN)'s third-quarter report, released after Thursday's close. AWS revenue reached $45.98 billion, ahead of the $45.29 billion analysts expected, and grew strongly from a year earlier. The cloud unit's Backlog stood at $578 billion, a measure of contracted future business.

The rest of the report was less tidy. Total revenue of $201.9 billion came in slightly below the roughly $202.2 billion consensus, and Earnings of $1.89 a share missed estimates of $1.96 to $1.97. Advertising growth slowed. Fourth-quarter sales guidance of $240 billion to $247 billion trailed the $244.5 billion estimate at its midpoint, and the Operating Income outlook of $28.5 billion to $33.5 billion was centered below the $32.99 billion forecast.

The number that stuck

What investors kept returning to was free cash flow. Amazon's trailing 12-month figure was negative $42.4 billion, compared with positive $14.8 billion a year earlier. The swing reflects the enormous cost of building data centers and buying chips for artificial intelligence.

Amazon held its 2026 Capital spending plan at about $220 billion and said it expects to spend "meaningfully more" in 2027. Chief Executive Andy Jassy did not play down the bill. "On the CapEx involved to grow the way we're talking about, it's meaningful," he said

The concern is that the AI build-out is consuming cash faster than it produces returns. A market analyst said: "Together, Amazon, Google, Microsoft (NASDAQ:MSFT) and Meta (NASDAQ:META) spent more than $200bn in the third quarter alone." She added that "the risk is that higher financing costs will absorb more of the cash generated."

A volatile Friday

Amazon traded sharply lower before the open on Friday, October 30, 2026, then recovered much of that ground to close down modestly at $240.35. Analysts split. Cantor Fitzgerald cut its target to $280 from $310 while keeping an Overweight rating, Citizens trimmed to $275 from $315, and BofA moved to $317 from $320. MoffettNathanson raised its target to $357 from $315, and UBS (NYSE:UBS) lifted its target to $352 from $348.

The broader market fared worse. The S&P 500 fell 140.32 points to 7,580.07, the Dow lost 572.25 points to 51,770.31, and the Nasdaq Composite dropped 747.73 points to 25,437.00, its worst day since June 5. Intel (NASDAQ:INTC)'s cash-burn warning set off a chip rout, and Amazon's figures added to doubts about megacap spending.

A theme across Big Tech

Amazon was not alone. Alphabet (NASDAQ:GOOGL) reported negative quarterly free cash flow of $9.1 billion on Wednesday and suffered its worst day ever on Thursday. Meta, the week before, posted its first negative quarterly free cash flow since 2012. Microsoft was the exception; a market strategist said its AI spending "was rational and measured, and it has remained cash-flow positive."

Strategists said the market has raised its standards. "The message from investors is becoming clearer: strong AI Demand is no longer enough on its own," said a senior market analyst. A trading specialist said: "A lot of them kind of got ahead of themselves. It's all earnings based and right now, they're not producing."

What to watch

The key question for Amazon is how much its 2027 spending rises and whether AWS growth keeps pace. Apple (NASDAQ:AAPL) reports on Monday, November 2, with results due after the close.

Investors are also watching the Federal Reserve, with markets pricing a December rate hike that would raise the cost of financing the AI build-out, along with the midterm elections on Tuesday and the October jobs report on Friday, November 6.