Shares Fall On Earnings Miss As Big Tech Market Rout Continues

Key Points:

• Amazon shares dropped as much as 9% in after-hours trading following third-quarter earnings that missed Wall Street expectations, with earnings per share at $1.89 versus the forecasted $1.97 and revenue of $201.9 billion slightly below the $202.25 billion estimate.
• The earnings decline was mainly attributed to the absence of $9.5 billion in pre-tax gains from AI startup Anthropic investments that had boosted prior results, while Amazon's fourth-quarter revenue guidance of $240 billion to $247 billion suggests potential to miss the Street's $244.5 billion forecast.
• Amazon's AWS unit saw strong 39% revenue growth driven by heavy AI-related investments, with CEO Andy Jassy projecting over 40% revenue growth in 2027 and 2028, indicating confidence in the long-term payoff of AI spending.
• Despite growth in AWS, other areas showed weaknesses: advertising revenue growth slowed to 12% year-over-year, down from over 20% in previous quarters, and the timing shift of Prime Day from Q3 to Q2 reduced reported third-quarter revenue by an estimated 4%.
• The broader tech sector also faced investor skepticism about AI returns, with major players like Alphabet, Nvidia, and Meta experiencing significant stock declines amid concerns over spending efficiency and slowing core business growth.