AMZN Stock Drops 7% As AI Spending Soars Past Expectations, While E-Commerce Growth Cools

• Amazon poured more than $77 billion into property and equipment during the third quarter to aggressively build out data centers.
• While Amazon Web Services (AWS) accelerated for its sixth consecutive quarter, fueled by AI giants like OpenAI and Anthropic, core online retail sales crawled by just 2% to $68.5 billion. 
• Amazon expects fourth-quarter revenue between $240 billion and $247 billion, slightly lower than the average $247.5 billion analysts polled by Fiscal.ai expected.

Amazon.com Inc.(AMZN) share price dropped about 7% after-hours on Thursday after the e-commerce giant reported third-quarter capital expenditures that heavily outpaced Wall Street projections, underscoring investor anxiety that the AI buildout might not transform into adequate revenue. 

The company stated that it spent upwards of $77 billion on property and equipment over the quarter ending September, primarily channeled into constructing new data centers and expanding its computing capabilities. This aggressive expansion resulted in a free cash outflow of $42.4 billion. Total revenue for the period climbed 12% to reach $201.9 billion.

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Despite the heavy spending, management maintained its previous projection from July, reiterating that total capital expenditures for the full year 2026 are expected to hit roughly $220 billion, adjusted upward earlier in the year due to memory chip supply constraints.

Incessant spending by hyperscalers has added to market anxiety over debt burdens and doubts about whether such expenses will translate to revenue, with the AI buildout also creating cash flow concerns. 

However, CEO Andy Jassy seems to be optimistic and forecasts two of the revenue drivers for Amazon to bring in trillion dollars over the next few years. “There has never been a trillion-dollar revenue business, and we may have two of them in the next  5-10 years.”  

Retail Slowdown Overshadows Cloud Growth 

On one hand, Amazon Web Services (AWS) continued a strong upward trajectory, accelerating for the sixth straight quarter. This momentum has been heavily supported by partnerships with leading AI enterprises, including OpenAI and Anthropic, which utilize Amazon's servers to back their complex foundational models.

Conversely, the company's traditional retail division displayed significant friction. Online sales managed a meager 2% gain, totaling $68.5 billion—marking the slowest growth rate for the segment since early 2023, when the retail arm was recovering from post-pandemic adjustments.

Fourth-Quarter Outlook

Looking ahead to the critical holiday shopping season, Amazon forecasted fourth-quarter revenue to land between $240 billion and $247 billion. While substantial, the midpoint falls slightly short of the average analyst consensus of $244.5 billion, signaling to markets that the retail division’s recovery may lack a rapid rebound.

The cautious outlook and soaring expenditures weighed heavily on market sentiment. Alphabet Inc.'s recent earnings report similarly spooked investors regarding the financial pressures of the AI transition.

AMZN Stock: Retail View 

Retail sentiment on Stocktwits was ‘bullish’ with ‘high’ message volumes. 

AMZN stock has gained 6% year-to-date. 

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