Amazon slides on light Q4 sales estimates, high cash burn
It reported a US$42.4 billion cash burn, driven by US$77.26 billion in capital spending.
On October 29, Amazon.com reported a significant cash burn in Q3 and forecast holiday-quarter revenue far below Wall Street estimates, causing its shares to drop nearly 7% in extended trading. The company's shares fell 4.3% in regular trading, ending at US$243.79. Amazon expects revenue between US$240.0 billion and US$247.0 billion in Q4, whereas analysts' average estimate was US$244.51 billion.
The company disclosed a trailing 12-month cash burn of US$42.4 billion, driven by capital expenditure of US$77.26 billion, which exceeded estimates by about US$20 billion. Analysts were unhappy with the report, with Dave Wagner of Aptus Capital Advisors stating that the free cash flow looked "ugly." Amazon's focus on AI software and infrastructure development, with forecasted capital expenditures of US$220 billion in 2026, also contributed to the negative reaction.
Despite the disappointing results, Amazon CEO Andy Jassy remained optimistic, stating that the company's strategy was working and expecting it to continue in the future. Jassy also highlighted AWS's potential to reach a trillion dollars in revenue within five years. However, advertising sales disappointed, rising only 12% to US$19.6 billion, below the 18% estimate from LSEG.
This marked the first time Amazon missed analyst estimates in seven quarters. Despite the slower growth, Jassy remained "pleased" with advertising sales and forecasted a return to "high teens" ad sales growth in the current quarter.
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