Amazon reports Q3 ad revenue up 11% YoY to $19.64B, vs. $20.82B est., and subscription services revenue up 11% YoY to $14B

Amazon's advertising revenue missed expectations, potentially indicating a slowdown in that growth engine.

Amazon reported third-quarter earnings that missed Wall Street expectations, with revenue at $201.94 billion against an estimate of $202.31 billion. Earnings per share were $1.89, below the estimated $1.96. Advertising revenue was particularly weak, coming in at $19.64 billion, significantly under the $20.82 billion expected. Despite these misses, Amazon Web Services (AWS) saw robust growth, with revenue reaching $45.98 billion, exceeding the $45.29 billion forecast. The company maintained its 2026 capital expenditure forecast at $220 billion, signaling continued investment in AI infrastructure. This aggressive spending contributed to a substantial negative free cash flow of $42.4 billion for the trailing twelve months, a 386% increase year-over-year. Online retail sales also fell short of projections.

The miss in advertising revenue, a crucial segment for Amazon, suggests a potential saturation or increased competition in the digital ad market, which could impact future growth projections for the company and its advertisers. Advertisers may need to re-evaluate their spending strategies on the platform. This also raises questions about the sustainability of the high growth rates previously seen in this segment.

Amazon's substantial negative free cash flow, driven by AI investments, highlights the immense capital required for the current technological arms race. While AWS continues to perform strongly, the financial strain of these infrastructure build-outs could influence future investment decisions or require a greater focus on monetization from other segments to offset costs.