Amazon posts $201.9 billion revenue, shares sink on AI capex

Amazon's results arrive in a week when Microsoft and Google parent Alphabet also reported robust cloud growth alongside soaring AI infrastructure costs, with Alphabet also posting weaker-than-expected advertising growth. Investors are closely watching how hyperscalers balance demand for AI compute against the spending required to meet it. The company's advertising business grew 12% year over year in the third quarter, missing analyst expectations, and its projected holiday-quarter revenue and operating profit are below Wall Street estimates at the midpoint of the range.

The heavy AI infrastructure spending pushed Amazon's free cash flow deeply negative; the company said free cash flow swung from positive $14.8 billion to negative $42.4 billion over the past year. Collectively, Amazon, Microsoft, Alphabet, and Meta Platforms are expected to spend more than $700 billion on capital expenditures in 2026, mostly on data centers.

AI company Anthropic's prospectus for its upcoming initial public offering, made public earlier this week, showed just how heavily the lab relies on Amazon and other major cloud companies for AI compute. Anthropic has committed to spending at least $110 billion on Amazon cloud services from this past May through April 2036, regardless of actual usage. According to Anthropic's IPO filing, Amazon has invested about $18 billion in Anthropic and committed to invest up to another $15 billion.