Amazon Misses Third-Quarter Estimates, but Cloud Unit Posts Its Fastest Growth in Nearly Five Years

Amazon gave a cautious sales forecast for the fourth quarter, which includes the crucial holiday shopping season, after reporting fiscal third-quarter results that landed below what Wall Street analysts had expected.

The Seattle-based company did see strong momentum in its cloud computing division, Amazon Web Services. AWS sales climbed 39.3% in the quarter that ended Sept. 30, up from 37% growth in the prior quarter. Amazon said it was the division's fastest pace of growth in nearly five years.

Even so, investors concentrated on the company's core business. Shares fell more than 6% in after-market trading once the results were released.

Amazon reported net income of $20.69 billion, or $1.89 per share, for the three months. A year earlier, the company earned $21.19 billion, or $1.95 per share. Sales rose to $201.94 billion from $180.17 billion in the same period last year. According to FactSet, analysts had predicted earnings of $1.97 per share on sales of $202.2 billion.

Looking ahead, Amazon said it expects fourth-quarter net sales of between $240 billion and $247 billion, an increase of 12% to 16% from a year earlier. Analysts had been looking for $244.16 billion.

Attention now turns to the earnings call on Thursday, where analysts will listen for any remarks from Amazon executives about the holiday season. Earlier this month, the company said it would hire 300,000 seasonal workers in the U.S. for the period, up from 250,000 last year.

Investors have also been watching to see whether Amazon's heavy spending on artificial intelligence is beginning to pay off. In July, CEO and President Andy Jassy told investors the company now expects capital spending, mostly on AI, to reach $220 billion. That figure covers robots, semiconductors and satellites. It is up from a $200 billion plan announced in February and far above the $128 billion spent in all of last year. Jassy pointed to higher memory chip costs as the main reason for the increase. He also said that even at $220 billion, Amazon will not have enough capacity to meet all of this year's demand.

The results arrive amid broader unease about AI spending. Alphabet reported weaker summer growth than analysts anticipated late Wednesday, and said it burned through more cash in the quarter, as measured by free cash flow, after its purchases of property and equipment topped $51 billion. Its stock plummeted Thursday. Such concerns are weighing on the entire AI industry following the large push to build data centers and fill them with AI chips.