Growth against the spending plan
Amazon made $20.69 billion in net income, or $1.89 per share, compared with $21.19 billion, or $1.95 per share, a year earlier. Sales rose to $201.94 billion from $180.17 billion. FactSet analysts had expected $1.97 per share on sales of $202.2 billion.
For the fourth quarter, Amazon forecast net sales of $240 billion to $247 billion, growth of 12% to 16% year over year. Analysts expected $244.16 billion, inside the company’s range.
The figures land as investors look for evidence that Amazon’s large AI investments are paying off. In July, CEO and President Andy Jassy said the company expected to spend $220 billion on capital expenditures this fiscal year, primarily on AI. That is up from the $200 billion plan announced in February and the $128 billion Amazon spent across the previous year. The budget includes robots, semiconductors and satellites; Jassy cited rising memory-chip prices as the main reason for the increase.
Jassy also warned over the summer that Amazon would not be able to meet all customer demand for its capacity this year, even with $220 billion in spending.
The demand question behind the forecast
The spending dilemma is not unique to Amazon. Alphabet’s report, published late Wednesday, unsettled investors after its summer growth fell short of analyst expectations. The company, which owns Google and YouTube, also reported lower free cash flow for the quarter after spending more than $51 billion on property and equipment. Its shares fell sharply on Thursday, reducing its market value by half a trillion dollars.
That reaction points to the larger test facing AI companies after heavy investment in data centers and AI chips: whether demand and returns can catch up with the cost of building capacity.
Amazon’s holiday outlook is cautious beside its plans for the season. Earlier this month, the company said it would hire 300,000 seasonal workers in the United States, compared with 250,000 last year. That hiring suggests expectations of a busy shopping period, while the sales forecast leaves a wide enough range to reflect uncertainty.
I think the more important gap is not between Amazon’s forecast and analysts’ estimate, which sits comfortably inside the range. It is between the company’s investment scale and what this report can yet show about returns. AWS growth is accelerating, but the quarter’s lower profit and the warning that capacity still will not meet demand leave the central question unresolved: how much more spending will be needed before growth turns into stronger earnings?
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