Amazon sinks as AI spending eclipses fastest cloud growth in five years

Amazon's shares plummeted on Thursday after the company disclosed a massive cash burn in the third quarter and signaled higher capital expenditures, despite its cloud computing arm, Amazon Web Services (AWS), continuing to grow. AWS cash flow remained strong, but the company's aggressive spending to capitalize on AI demand overshadowed broader growth, disappointing investors.

The Seattle-based retailer anticipates revenue between $240.0 billion and $247.0 billion in the fourth quarter, slightly below expectations. Investors reacted negatively, pushing shares down by up to 7%. The decline mirrored a broader selloff in tech stocks, with Alphabet shares falling 12% in regular trading. Amazon reported a cash burn of $42.4 billion for the trailing 12 months, driven by $77.26 billion in capital expenditures, exceeding estimates by $20 billion.

CEO Andy Jassy assured investors that Amazon's strategy would work and AWS could reach $1 trillion in revenue within five years. However, the weak guidance and weak advertising sales suggest US retailers might face challenges during the upcoming holiday season.