Amazon Shares Plunge After AI Spending Drives Massive Cash Burn
Amazon shares fell following a third-quarter earnings miss and a $42.4 billion annual cash burn driven by aggressive artificial intelligence infrastructure investments.
Shares of Amazon.com fell between 4% and 12.5% in after-hours trading on October 29, 2026, after the company reported third-quarter revenue of $201.9 billion and earnings per share of $1.89, both missing Wall Street estimates. The decline was driven by a cautious fourth-quarter revenue outlook of $240 billion to $247 billion and a significant cash burn. The company reported a trailing 12-month free cash flow deficit of $42.4 billion, fueled by quarterly capital expenditures of $77.3 billion—more than double the previous year's spending.
Despite the overall miss, Amazon Web Services (AWS) recorded its fastest growth in nearly five years, with revenue rising 39.3% to $45.98 billion. AWS now accounts for nearly 23% of total company revenue. Retail and advertising performance lagged, with advertising growth slowing to 12%, which the company attributed to the rescheduling of Prime Day into the second quarter.
CEO Andy Jassy defended the aggressive spending as a "once-in-a-lifetime opportunity" to lead in AI. He projected that AWS growth would exceed 40% in 2027 and 2028 and predicted that both the retail and cloud divisions could each become trillion-dollar annual revenue businesses within the next decade. To fund these initiatives, Amazon raised $48.1 billion in new long-term debt during the third quarter. The company maintained a 2026 capital expenditure forecast of $220 billion and indicated that spending would be "meaningfully" higher in 2027.
