Amazon.com reported a $42.4 billion cash burn in the trailing 12 months through September, driven by $77.26 billion in capital expenditures, nearly $20 billion above estimates. The company also forecasted revenue between $240 billion and $247 billion for Q4, below Wall Street’s average estimate of $244.51 billion, sending shares down 5% in extended trading.
CEO Andy Jassy announced plans to increase capital expenditures “meaningfully” in 2027, following the company’s reiteration of a $220 billion capex forecast for 2026. The spending surge reflects Amazon’s aggressive push into AI infrastructure, including data centers and chip purchases, which has drawn investor scrutiny amid declining free cash flow.
Immediate Financial Impact
Amazon’s third-quarter results revealed a $42.4 billion cash burn over the past year, up from a $7.6 billion outflow in the prior quarter and a $14.8 billion inflow in Q3 2023. The company’s free cash flow turned negative due to high capital expenditures, totaling $75.9 billion in Q3 alone, primarily allocated to AWS and AI infrastructure. Shares fell 4.3% in regular trading to close at $243.79, with an additional 5% drop in after-hours trading.
Analysts highlighted the “ugly” free cash flow performance, noting that while operations generated cash, capital expenditures “swallowed it.” Revenue for Q4 is projected to fall short of expectations, signaling potential challenges for US retailers during the holiday season amid rising living costs.
AI and Cloud Growth Amid Spending Concerns
Despite the financial strain, Amazon’s cloud business continued to grow, with AWS revenue rising 39% to $46 billion in Q3, exceeding analyst estimates. The company’s cloud capacity is described as “largely sold out” through 2028, with significant commitments already secured. Jassy emphasized confidence in the AI business model, stating that AI infrastructure investments are expected to generate returns within three years of deployment.
However, the scale of spending has raised questions about Amazon’s ability to sustain rapid growth while competitors like Microsoft and Alphabet also ramp up AI investments. Microsoft recently lowered its 2025 capex forecast to $170 billion, while Amazon and Alphabet maintained their $220 billion outlooks.
Market Reaction and Long-Term Outlook
Investors remain divided on Amazon’s strategy. Some analysts argue that the long-term benefits of AI infrastructure will outweigh short-term cash burn, while others warn that the “steep and negative” trend in free cash flow could signal unsustainable spending. The company’s guidance for higher capex in 2027 suggests continued prioritization of AI and cloud expansion, even as free cash flow remains negative.
Amazon’s retail segment, which accounts for the majority of revenue, faces additional pressure from consumer spending slowdowns due to inflation and higher gasoline prices. Despite this, industry forecasts predict a 4.2% increase in US holiday sales, offering a potential offset to retail headwinds.