Amazon Stock Slides After Hours Despite AWS Growing 39% as Free Cash Flow Turns to a $42 Billion Outflow
Record profit and the fastest cloud growth in almost five years were not enough, as a $77.3 billion quarter of spending and an earnings miss sent Amazon shares sharply lower in extended trading.
Thursday, October 29, 2026/2 min read
Amazon's cloud unit just grew faster than at any time in nearly five years, and the stock fell anyway. Shares dropped as much as 12 percent in the minutes after the report, then recovered to a loss of about 6 percent, because the quarter that delivered record profit also delivered a cash bill that startled the market.
Net sales rose 12 percent to $201.9 billion, up from $180.2 billion a year earlier, according to Amazon's earnings release. Earnings were $1.89 a share on net income of $20.7 billion, short of the $1.97 analysts had expected, AI Weekly reported. The shares went into the report near $244 after a tech sell-off we covered in our market close report.
How fast did AWS grow?
Amazon Web Services sales rose 39 percent to $46.0 billion, its fastest growth in almost five years, and above the $45.29 billion Wall Street had pencilled in. AWS operating income reached $17.8 billion. Contracted backlog stood at $578 billion, more than double a year earlier, and chief executive Andy Jassy said AWS can keep growing above 40 percent in both 2027 and 2028, AI Weekly said. In the release he said the company's AWS investment in functionality and infrastructure "is working."
Across the whole company, operating income jumped 61 percent to $28.1 billion, a 13.9 percent margin that Amazon called its highest ever. The shift of Prime Day out of the quarter would otherwise have added about 4 percentage points to sales growth.
Why did the stock fall?
Cash. Amazon spent $77.3 billion on property and equipment in the quarter alone. Over the past twelve months its net capital spending was $210.7 billion, up 82 percent, and free cash flow for the trailing year swung to an outflow of $42.4 billion, from an inflow of $14.8 billion a year earlier, per the release and AI Weekly. The company still expects about $220 billion of cash capital spending in 2026 and Jassy said 2027 will be meaningfully higher.
That arithmetic is exactly what hit Alphabet earlier in the day. Investors have been willing to fund the AI build-out only while the returns look close, and a record cash outflow makes them look further away. investingLive recorded the stock falling from about $244 to a low near $214 before settling around $229 by 4:50 p.m. in New York.
What does Amazon expect for the holidays?
For the fourth quarter Amazon guided net sales of $240.0 billion to $247.0 billion, growth of 12 to 16 percent, and operating income of $28.5 billion to $33.5 billion. Friday's open will show whether buyers treat the drop as a gift or the first sign that the market has stopped giving the cloud giants credit for growth alone.
Published in The Outspoken Digest
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