Shares of Amazon.com Inc. fell more than 7% in extended trading on Thursday, October 29, after its third quarter results missed street expectations, the mid-point of its fourth quarter revenue guidance also trailed projections, while its free cash flow position became worse than last year.
Amazon reported revenue of $201.94 billion during the quarter, lower than expectations of $202.31 billion. Earnings Per Share (EPS) of $1.89 was also lower than the $1.96 estimate. The company’s advertising revenue of $19.64 billion was also lower than the $20.82 billion estimate.
Amazon Web Service, the cloud infra business turned out to be the only saving grace, growing 39% from last year and the $45.98 billion revenue figure was also higher than the $45.29 billion estimate, albeit slightly.
Capex for the full year will remain at $220 billion, as per the management. Amazon spent $77.3 billion as capex in Q3, well above the analyst expectations of $58.7 billion. The result of this aggressive spending was a sharp deterioration in the company’s free cash flow profile, which stood at a negative $42.4 billion, compared to just $7.6 billion during the same quarter last year.
The negative free cash flow position is similar to Amazon’s peers Alphabet and Meta, both of which saw their cash flows in the red during the quarter, and shares of both these companies plunged after those announcements.
For the ongoing quarter, Amazon expects revenue to be between $240 billion to $247 billion. The mid-point of this guidance range also turned out to be lower than the analysts estimate of $244.5 billion. The peak holiday shopping season in Q4 makes it Amazon’s biggest topline generating quarter.
CEO Andy Jassy believes that AWS will grow at levels of over 40% next year and even in 2028. He expects AWS to become a $1 trillion revenue business over the next five to 10 years.
Despite AWS doing well, the remaining of Amazon’s segments were a disappointment. The core online sales segment grew only 2% from last year, and also turned out to be lower than estimates, while the advertising revenue increased by 11% during the quarter, also missing expectations.
Amazon shares ended 7.3% lower in extended trading at $225.99. The stock had already declined 4.5% in regular trade on Thursday before the results were announced.
Amazon shares fall 7% in extended trade after Q3 results show sharp deterioration in free cash flow