Amazon Earnings Miss Wall Street Targets as Jassy PINs Future on Trillion‑Dollar AWS and AI Push

Amazon's quarterly earnings fell short of Wall Street expectations, wiping about 7% off its shares in pre‑market trading on Friday and putting fresh focus on chief executive Andy Jassy's plan to build two trillion‑dollar businesses in cloud and retail.

Jassy said Amazon could have two trillion‑dollar revenue arms, Amazon Web Services (AWS) and its Stores division, within five to 10 years. He described that as a long‑term ambition rather than a forecast.

Revenue rose 12% year on year to $201.9 billion (about £165.5 billion), just shy of the $202.25 billion (about £165.9 billion) analysts polled by Bloomberg had expected. Diluted earnings per share slipped to $1.89 from $1.95, missing the $1.97 forecast.

Net income eased to $20.7 billion (about £16.9 billion) from $21.2 billion (about £17.3 billion). Amazon said the decline mainly reflected $9.5 billion (about £7.8 billion) in pretax gains from Anthropic investments booked in the same quarter last year.

Holiday Outlook Disappoints Wall Street

Amazon forecast fourth‑quarter net sales of $240 billion to $247 billion (about £196.7 billion to £202.2 billion), compared with analyst expectations of about $244.5 billion (about £200.2 billion). It guided operating income of $28.5 billion to $33.5 billion (about £23.4 billion to £27.5 billion).

Online store sales came in at $68.47 billion (about £56.1 billion), below the $69.6 billion (about £57.1 billion) analysts had forecast. Advertising revenue rose 12% to $19.6 billion (about £16.1 billion).

Amazon said the timing of Prime Day affected growth. The event fell in the second quarter for most major countries this year, having taken place entirely in the third quarter in 2025. Without that shift, the company said, year‑on‑year sales growth would have been about four percentage points higher.

Operating performance improved. Operating income rose to $28.1 billion (about £23.1 billion) from $17.4 billion (about £14.3 billion) a year earlier, and the 13.9% operating margin was the highest in the company's history.

AWS Growth Raises Spending Questions

AWS sales climbed 39.3% to $46 billion (about £37.7 billion), an annualised run rate of about $184 billion (about £150.8 billion), according to Amazon. Jassy said AWS could grow by more than 40% in both 2027 and 2028.

He said Fortune 500 companies spent nearly seven times as much on Amazon's Bedrock AI service as a year earlier, while total Bedrock token volume rose almost 17‑fold. He also said about 85% of global IT spending remains on premises, and described a 10‑ to 20‑year shift towards cloud computing.

The expansion is costly. Amazon reported a trailing 12‑month free cash flow outflow of $42.4 billion (about £34.7 billion), compared with an inflow of $14.8 billion (about £12.1 billion) a year earlier, driven largely by spending on property and equipment for artificial intelligence. It maintained its expectation of about $220 billion (about £180.2 billion) in cash capital expenditure for 2026.

In a note to clients, Wedbush Securities analyst Dan Ives said the question for investors was how long AWS could sustain its current pace as new capacity and Amazon's in‑house Trainium chips came online.

Alexa, Automation and Prime Video Push

Jassy said more than 400 million customers had used Alexa for shopping in the past 12 months, with interactions up 570% year on year. He said US customers who shop with Alexa spend 50% more per order than those who do not. Amazon did not provide a breakdown of that comparison, and it does not show that Alexa causes the higher spending.

He said Amazon now operates more than one million robots across its fulfilment network. Many people would continue to work in fulfilment centres, he said, but robots would take on more repetitive tasks.

On Prime Video, Jassy described a 'significant business' with a revenue run rate in the tens of billions of dollars that is profitable in its own right. Amazon did not give precise figures.