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Amazon's Q3 Revenue Misses Expectations, AWS Cloud Unit Exceeds Forecasts with 39% Growth
Key points
- Amazon's Q3 net sales were $201.9 billion, below $202.2 billion expected.
- Diluted EPS was $1.89, missing the $1.97 analyst forecast.
- AWS revenue reached $45.98 billion, exceeding expectations and growing 39% year-over-year.
- AWS growth was the fastest since Q4 2021, driven by compute and storage demand.
- Amazon reported negative free cash flow of $42.4 billion due to investments.
- AWS sales grew 39.3% in Q3, up from 37% in the previous quarter.
- Amazon forecasts cautious sales for the current fourth quarter.
- Amazon's shares dropped over 6% in after-market trading.
- Amazon will hire 300,000 US seasonal workers, up from 250,000 last year.
- CEO Andy Jassy believes AWS can become a $1 trillion annual revenue business.
- Amazon expects $220 billion in capital expenditures by 2026, mostly for AWS.
Overall Financial Performance
Amazon's third-quarter earnings report showed net sales of $201.9 billion, which was below the $202.2 billion analysts had anticipated. Fully diluted earnings per share were $1.89, also missing the expected $1.97.
The company's free cash flow for the trailing 12 months was negative $42.4 billion, a significant decrease compared to positive free cash flow of $14.8 billion in the prior year. This negative cash flow is largely due to substantial investments, particularly in artificial intelligence.
AWS Cloud Unit Exceeds Expectations
In contrast to the overall results, Amazon Web Services (AWS), the company's cloud computing division, reported strong performance. AWS sales reached $45.98 billion, surpassing analyst expectations of $45.29 billion.
This represents a 39% increase year-over-year, marking the fastest growth rate for AWS since the fourth quarter of 2021. AWS operating income grew to $17.8 billion, up from $11.4 billion in the third quarter of the previous year.
Drivers of AWS Growth
Amazon CEO Andy Jassy noted that core compute and storage revenue within AWS grew at their fastest rates in several years. This growth is partly attributed to increased demand for artificial intelligence (AI) workloads.
AWS has been expanding its offerings to support AI, including plans to broaden its portfolio of Nvidia graphics processing units (GPUs) and the acquisition of data analysis startup DuckLabs. The company also secured deals with Meta and OpenAI during the quarter.
Industry Context
While Amazon remains the leading cloud provider by revenue, other major cloud rivals, such as Alphabet and Microsoft, have also reported accelerated growth. Alphabet's Google Cloud business, which includes infrastructure and Google Workspace subscriptions, more than doubled in the third quarter.
Major cloud providers are actively investing in data centers to accommodate the growing demand for high-performance computing necessary for AI applications.
Updates
- AWS sales grew 39.3% in Q3, up from 37% in the previous quarter.
- Amazon forecasts cautious sales for the current fourth quarter.
- Amazon's shares dropped over 6% in after-market trading.
- Amazon will hire 300,000 US seasonal workers, up from 250,000 last year.
- CEO Andy Jassy believes AWS can become a $1 trillion annual revenue business.
- Amazon expects $220 billion in capital expenditures by 2026, mostly for AWS.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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How outlets covered it
Amazon CEO Andy Jassy stated AWS could become a $1 trillion annual revenue business, projecting over 40% growth in 2027 and 2028. To achieve this, Amazon plans to increase capital expenditures, with an estimated $220 billion by 2026, primarily for AWS infrastructure to support AI-driven cloud demand.
Amazon Web Services (AWS) reported $45.98 billion in revenue for Q3, a 39% year-over-year increase, surpassing analyst expectations and marking its fastest growth since Q4 2021. This growth reflects increased demand for compute and storage, driven partly by AI workloads, as AWS expands its GPU offerings and acquires data analysis startup DuckLabs.
Amazon's Q3 earnings report showed mixed financial results, with overall performance below analyst expectations and a cautious sales forecast for the critical holiday shopping period. However, its AWS cloud computing unit recorded a 39.3% sales increase, marking its fastest growth in nearly five years. Investors reacted negatively to the overall outlook, causing shares to drop over 6% in after-market trading.
Amazon reported third-quarter earnings below analyst expectations for total revenue and earnings per share, with net sales at $201.9 billion against an expected $202.2 billion. However, its Amazon Web Services (AWS) unit surpassed revenue forecasts, reaching $45.98 billion, a 39% increase year-over-year. The company also reported negative free cash flow of $42.4 billion, attributed to significant investments in AI.