Amazon shares sink as spending on AI overshadows growth in cloud unit

Amazon's cloud unit continued to grow steadily, meeting AI demand, but the company's heavy spending on AI infrastructure and weaker advertising performance raised concerns among investors. The e-commerce giant reported third-quarter revenue of $201.9 billion, slightly below expectations, and profit of $20.7 billion, which also fell short of projections.

Amazon cited gains from its investment in AI company Anthropic for the profit decline. Amazon Web Services (AWS), the cloud unit, reported a 39.3% sales increase to $45.98 billion, outpacing Wall Street targets. The results indicated high demand for Amazon's cloud services, particularly those related to AI. However, the company's non-cloud businesses were performing poorly, and the heavy AI infrastructure spending led to negative free cash flow.

Amazon reiterated its 2026 capital expenditure expectations of around $220 billion. The company's advertising business grew 12% year-over-year in Q3 but missed analyst expectations, and projected holiday-quarter operating profits were below Wall Street estimates. Shares of Amazon dropped 5% in after-hours trading. Similar earnings from peers Microsoft and Alphabet, which also reported strong cloud growth and soaring AI infrastructure costs, further emphasized the need for AI compute in the tech industry.