Amazon shares fall 6% as $77 billion AI spending raises cash flow concerns

Amazon's shares fell 6% on Thursday after the tech giant disclosed that it had spent over $77 billion on property and equipment in the third quarter, exceeding analysts' expectations. This substantial capital expenditure was driven by Amazon's efforts to expand its data centers and meet the growing demand for artificial intelligence services.

Despite the strong spending, the company's third-quarter revenue grew by only 12% to $201.9 billion, falling short of the estimated $244.5 billion. Online sales experienced the weakest increase since early 2023, with a modest 2% rise to $68.5 billion, while advertising sales grew by 11%, the slowest pace since 2020. Analysts attributed some of the sluggishness in retail to Amazon's decision to shift its Prime Day sales to June from July.

However, the firm's cloud business, Amazon Web Services (AWS), continued to show robust growth for the sixth consecutive quarter, driven by clients such as OpenAI and Anthropic. AWS's operating margin improved, albeit the company's overall free cash outflow over the past year reached $42.4 billion. Amazon had forecasted spending $220 billion on capital expenditures for 2026, maintaining this projection in its Thursday statement.

The stock closed at $243.79, down about 6% from its previous close, following a year of gains of 5.6%. Industry analysts expressed mixed views, with some expressing concerns over Amazon's heavy AI-related spending and the impact on free cash flow, while others highlighted the accelerating growth of AWS as a positive sign.