Amazon's Amazon Q3 earnings disappointed Wall Street on Thursday, October 29, 2026, even as the company's cloud computing division posted its fastest growth in nearly five years. The Seattle-based tech giant reported net income of $20.69 billion, or $1.89 per share, on net sales of $201.94 billion for the quarter ended September 30 — both below analysts' expectations — and shares fell more than 5% in after-hours trading as investors focused on the core retail business and a cautious forecast for the holiday quarter.
The Amazon Q3 earnings report lands at a delicate moment for big technology stocks. Just a day earlier, Alphabet's weaker-than-expected results sent its shares plunging and dragged the Nasdaq lower, and investors are now asking a harder question of every tech giant: is the enormous spending on artificial intelligence actually paying off? Amazon's answer on Thursday was mixed — a booming cloud business on one side, and a retail and advertising performance that fell short of the market's high bar on the other.
Amazon released its third-quarter results after the US market closed on Thursday, October 29. The headline numbers told two stories at once. Net sales rose 12% to $201.94 billion, compared with $180.17 billion in the same quarter of 2025, but analysts surveyed by FactSet had expected $1.97 per share on sales of $202.2 billion — so both profit and revenue came in just under the bar. Net income actually fell from $21.19 billion, or $1.95 per share, a year earlier, although Amazon said that comparison is distorted by a $9.5 billion pre-tax gain on its investment in the AI company Anthropic that flattered the year-earlier quarter.
The market's reaction was swift. Shares were down more than 5% in after-market trading when the results were released, according to the Associated Press, with one market tracker putting the after-hours fall at 5.91%. The selling reflected disappointment not only in the headline miss but in the guidance: for the fourth quarter, which covers the critical holiday shopping period, Amazon said it expects net sales of between $240 billion and $247 billion, a 12% to 16% increase on a year earlier. Analysts had been expecting about $244.16 billion, so the top of Amazon's range barely clears the consensus, and the bottom falls clearly short of it.
Within the numbers, the segment detail explains why investors were torn. North America sales rose 6% to $112.9 billion, and international sales rose 5% to $43.1 billion. Advertising revenue grew 11% to $19.6 billion, below the roughly $20.8 billion analysts had expected. Amazon said sales were hurt by the calendar shift of Prime Day, its big sales event, which fell in the second quarter this year for most large countries, whereas in 2025 it occurred entirely in the third quarter. Excluding that shift, Amazon said, third-quarter sales growth would have been approximately four percentage points higher.
Amazon enters the holiday season as the world's largest online retailer and one of the biggest spenders on artificial intelligence infrastructure. Chief executive Andy Jassy disclosed to investors in July that Amazon now expects capital spending, mostly on artificial intelligence, to total $220 billion this year — up from the $200 billion investment plan announced in February and well above the $128 billion spent across all of last year. That spending covers data centres, robots, semiconductors and satellites, and Jassy has cited the higher cost of memory chips as a main reason for the increase.
Jassy told investors this past summer that even at the $220 billion level, Amazon will not have enough capacity to meet all of the demand it has this year — a remark that captures both the scale of the AI build-out and the pressure to show returns from it. The company said earlier this month that it would hire 300,000 seasonal workers in the United States for the holiday shopping period, up from 250,000 last year, a sign of how much volume it expects even as it automates more of its warehouses.
The earnings report also arrived in a week when the AI trade itself came under scrutiny. Alphabet, the company behind Google and YouTube, reported weaker growth than analysts expected late on Wednesday and said its purchases of property and equipment topped $51 billion in the quarter, burning through cash on a free-cash-flow basis. Its stock plummeted on Thursday, dragging the Nasdaq down 1.38%. Amazon's results were therefore read not just as a verdict on one company, but as another data point in the market's wider debate about whether AI spending is generating returns fast enough to justify its cost.
If there was one unambiguous bright spot in the Amazon Q3 earnings report, it was Amazon Web Services. AWS sales rose 39.3% to $46.0 billion, higher than the 37% growth rate of the previous quarter and ahead of the roughly $45.5 billion analysts expected. It marked the fastest growth rate in nearly five years, the company said, and AWS operating income jumped to $17.8 billion from $11.4 billion a year earlier.
The acceleration matters because AWS is Amazon's profit engine. Consolidated operating income increased to $28.1 billion from $17.4 billion a year earlier, and the 13.9% operating margin was the highest Amazon has ever reported. North America operating income rose to $8.7 billion from $4.8 billion, and international operating income rose to $1.6 billion from $1.2 billion. But it was AWS, with its $17.8 billion operating profit, that did most of the heavy lifting.
Amazon's cloud momentum also has a forward-looking element that investors welcomed. The company has signed new AI-related agreements with major customers, and management now projects that AWS revenue growth will exceed 40% in both 2027 and 2028, according to market coverage of the report. That outlook, if delivered, would suggest the AI infrastructure spending is translating into durable cloud demand — the exact question hanging over the whole sector this week.
Amazon's own framing of the quarter centred on the Prime Day calendar shift and the strength of the cloud business. The company said that excluding the Prime Day shift, third-quarter year-over-year sales growth would have been approximately 400 basis points, or four percentage points, higher — an argument that the underlying retail business is stronger than the headline 12% suggests. It also pointed to the record operating margin as evidence that efficiency gains are flowing through even as it invests heavily.
Jassy's summer warning still frames the debate: he told investors that even at the $220 billion level of capital spending, Amazon "will not have enough capacity to meet all of the demand it has this year." That statement cuts both ways for shareholders. On one hand, it signals demand for Amazon's cloud and AI services is outrunning supply. On the other, it commits the company to a spending pace that makes any disappointment in growth or margins more punishing — which is exactly what Thursday's after-hours sell-off showed.
Market reaction, as reported by the Associated Press, was focused on the core business rather than the cloud beat: shares fell more than 5% in after-hours trading "as investors focused on the core business." Analysts will now look to Amazon executives' comments on the earnings call about the holiday shopping season, where the company must convert its 300,000 seasonal hires and its AI investments into sales at the top of its $240 billion to $247 billion guidance range.
Amazon's results matter well beyond its own shareholders because the company sits at the intersection of three of the biggest stories in the US economy: consumer spending, cloud computing and AI investment. A cautious holiday outlook from the country's largest online retailer is a signal about how the American consumer is holding up heading into the most important shopping weeks of the year, and about how much of that spending is shifting online versus staying in stores.
The report also matters as a stress test for the AI spending boom. Amazon, Alphabet, Microsoft and Meta are collectively spending hundreds of billions of dollars a year on data centres and chips. When Alphabet's stock fell sharply on Thursday after its own results, and Amazon's shares followed after hours, the market was effectively repricing how quickly that spending must pay off. Amazon's AWS acceleration — 39% growth, its fastest in nearly five years — is evidence the demand is real. But the fact that even that was not enough to save the shares shows how high the bar has become.
For workers and shoppers, the stakes are tangible. Amazon's plan to hire 300,000 seasonal workers, up from 250,000 last year, makes it one of the largest single sources of holiday-season jobs in the country. And its fourth-quarter sales range of $240 billion to $247 billion will shape expectations for everything from delivery networks to the small businesses that sell through its marketplace.
The immediate focus shifts to Friday's regular trading session, when investors will deliver their full verdict on the results after digesting the earnings call. If the after-hours fall holds, Amazon will join Alphabet in a week of sharp corrections for mega-cap technology stocks, and attention will turn to the remaining big-tech reporters — including Apple — for further evidence on AI returns.
Over the coming weeks, the key numbers to watch are the holiday indicators: early Black Friday and Cyber Monday sales, Amazon's own commentary on order volumes, and whether the company tracks toward the top or the bottom of its $240 billion to $247 billion fourth-quarter range. Analysts will also watch AWS growth in the current quarter for signs that the acceleration toward 40%-plus growth in 2027 is on track.
Longer term, the debate will not go away. Amazon has committed to $220 billion of capital spending this year, and Jassy has already warned capacity will still fall short of demand. The question for 2027 is whether that spending converts into the kind of sustained cloud and retail growth that justifies it — or whether investors start demanding a slower pace and faster returns.
Did Amazon beat or miss earnings expectations in Q3 2026? Amazon missed. It reported net income of $20.69 billion, or $1.89 per share, against expectations of about $1.97 per share, and net sales of $201.94 billion against expectations of about $202.2 billion.
How fast did AWS grow in the third quarter? Amazon Web Services sales rose 39.3% to $46.0 billion, the fastest growth in nearly five years and ahead of the roughly $45.5 billion analysts expected.
Why did Amazon shares fall after the results? Shares fell more than 5% in after-hours trading as investors focused on the core retail business, weaker-than-expected advertising revenue, and a fourth-quarter sales forecast of $240 billion to $247 billion that looked cautious for the holiday season.
What is Amazon's outlook for the holiday quarter? Amazon expects fourth-quarter net sales of $240 billion to $247 billion, a 12% to 16% increase on the same period last year, against analyst expectations of about $244.16 billion.
How much is Amazon spending on AI? Amazon expects capital spending, mostly on artificial intelligence, to total $220 billion this year, up from $200 billion planned in February and $128 billion spent in all of last year — and chief executive Andy Jassy has said even that will not be enough capacity to meet demand.
Related coverage on US News Pulse: Nasdaq Falls 1.4% as Alphabet Rout Drags Wall Street Lower on Thursday, Fed Holds Rates at 3.75%-4% as Two Officials Push for a December Rate Hike, and Alphabet Q3 Earnings: Google Cloud Soars 103% as Profit Miss Sends Shares Down.
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