Amazon Shares Drop 6% After Cloud Growth Fails to Offset Retail Miss

Amazon shares fell more than 6% in after-hours trading on Oct. 29 after the company reported third-quarter earnings below Wall Street forecasts. Net income for the three months ended Sept. 30 was $20.69 billion, or $1.89 per share, compared with $21.19 billion, or $1.95 per share, a year earlier. Analysts surveyed by FactSet had projected earnings of $1.97 per share.

Sales rose to $201.94 billion from $180.17 billion in the same quarter last year, falling short of the $202.2 billion analysts had expected. The company's cloud division posted stronger results. Amazon Web Services revenue grew 39.3% in the quarter, up from 37% growth in the prior quarter, marking the unit's fastest growth rate in nearly five years.

For the fourth quarter, which includes the holiday shopping season, Amazon guided net sales of $240 billion to $247 billion. That range represents growth of 12% to 16% from a year earlier. Analysts had forecast $244.16 billion for the period. Amazon said earlier in October that it would hire 300,000 seasonal workers in the United States, compared with 250,000 last year.

CEO and President Andy Jassy told investors in July that Amazon expects capital spending, mostly on artificial intelligence, to reach $220 billion. The figure covers robots, semiconductors and satellites, and it is up from a $200 billion plan announced in February. Spending on the category totaled $128 billion last year. Jassy attributed the increase to higher memory chip costs and said that even at $220 billion, the company would not have enough capacity to meet all of this year's demand.

Amazon's results arrived alongside a report from Alphabet, which said late Wednesday that its summer growth came in below analyst expectations. Alphabet's purchases of property and equipment topped $51 billion in the quarter, and the company's stock fell on Thursday. Analysts have been watching spending across the industry as companies build data centers and fill them with AI chips.