Amazon (AMZN) Slides After Hours as AWS Surges but Cash Burn Balloons

Amazon's cloud business just posted its fastest growth in nearly five years. The stock still got hit.

Shares dropped more than 6% in extended trading Thursday, and at one point were down as much as 11%, after the company missed on earnings and revenue and showed a swelling cash burn. Friday's open will say whether the selling sticks.

Start with the headline numbers. Per CNBC's rundown, Amazon earned $1.89 a share against $1.96 expected, on revenue of $201.94 billion against $202.31 billion. Those are small misses, not disasters.

The real story is the split inside the report. AWS revenue climbed 39% to $45.98 billion, beating the $45.29 billion forecast, and AWS operating income rose 55% to $17.8 billion.

Consolidated operating income jumped 61% to $28.1 billion, and the operating margin hit a record 13.9%. By that measure, this was one of the best quarters Amazon has ever delivered.

So why the sell-off? Advertising revenue came in at $19.64 billion versus $20.82 billion expected, and online store sales grew just 2% to $68.47 billion. Amazon blamed some of that on Prime Day moving into the second quarter this year, ahead of the FIFA World Cup.

Then there's the cash. Capital expenditures hit $77.3 billion in the quarter, up from $35.1 billion a year earlier and far above the $58.7 billion analysts expected, according to FactSet. Trailing twelve-month free cash flow was negative $42.4 billion, and Amazon says it still expects to spend $220 billion on capex this year.

CEO Andy Jassy told investors the company will "spend meaningfully more in 2027." That line did not help, since the market has spent the week punishing big tech for exactly this.

Alphabet fell about 12% on Thursday, a record one-day drop, after its own revenue miss and negative free cash flow. As Deadline noted, investors are demanding proof that AI spending turns into revenue, and Amazon's guidance did little to settle the debate.

Fourth-quarter revenue guidance of $240 billion to $247 billion has a midpoint a touch under the $244.5 billion Wall Street wanted. For a quarter that includes the holiday rush, that matters.

"Our AWS investment in functionality and infrastructure is working." — Andy Jassy, CEO, Amazon

Jassy has a case. He said he expects AWS growth of "over 40%" in both 2027 and 2028, and he thinks AWS can become a $1 trillion revenue business within five to 10 years. The chips business, he said, continues to grow triple digits, and Trainium chips should become available externally late in 2027.

For investors, the thesis is simple. Amazon is two companies: a cloud engine that's accelerating at a $184 billion annual run rate, and a retail and ad machine posting record margins while it digests a timing quirk. The stock is being priced on the cash burn between them.

The risks are not small. Free cash flow has now been negative two quarters in a row, capex is running about $19 billion over estimates in a single quarter, and Jassy has told you 2027 spending goes up again. If AWS growth slips from 39%, the math gets uncomfortable fast.

Ad growth is the other soft spot. Amazon says fourth-quarter advertising growth should rebound to nearly 20%, per TradingKey's breakdown. That's a specific, testable promise.

What to watch next is straightforward. First, how the stock trades once regular hours start Friday, and whether it holds the $230 area it was testing after the bell. Second, AWS growth staying at or above 39% when the next report lands.

Third, any sign that capex growth is flattening. Microsoft trimmed its 2026 capex forecast to $170 billion from $175 billion this week, and the stock held up. Amazon went the other way and is getting a rougher reception.

If you already own Amazon, the quarter doesn't break the story: record margins, accelerating cloud, a clear AI roadmap. If you're looking to add, a post-earnings dip driven by capex fears and a Prime Day shift is the kind of entry long-term holders tend to want.

Just size it knowing the cash burn will stay in the headlines. Bottom line: Amazon's engine is running hotter than ever, and the market is only arguing about the fuel bill.