Amazon Stock Soars on Earnings and Revenue Beat, Despite Spending Guidance

Amazon (AMZN) shares surged nearly 11% on Friday following a stellar Q3 earnings report that exceeded expectations across the board. The e-commerce and cloud computing giant also raised its spending forecast, citing sustained demand for its artificial intelligence (AI) services and robust growth in its cloud division, Amazon Web Services (AWS).

AWS proved to be a significant catalyst for both revenue and profit growth. Cloud sales climbed an impressive 20% year-over-year to reach $33 billion, surpassing analyst estimates. This division alone generated operating income of $11.4 billion, contributing approximately two-thirds of Amazon’s total operating profit. The strong performance signals a resurgence for AWS, which had faced concerns about slowing growth amid intensifying competition.

The digital advertising business also continued its upward trajectory, with revenue jumping 24% to $17.7 billion. Overall, Amazon’s total sales increased by 13% to $180.17 billion, exceeding the average analyst estimate of $177.8 billion, according to LSEG data. Earnings per share (EPS) clocked in at $1.95, significantly beating the consensus estimate of $1.57.

“Amazon’s scale creates a formidable moat around its core businesses, allowing for sustained growth and profitability,” noted analysts at Pivotal Research in a post-earnings research note. “The company appears to have numerous healthy organic growth opportunities driven by its high margin AWS cloud segment and areas like advertising.” Pivotal maintains a buy rating on the stock.

Prior to the earnings release, the cloud sector was a key area of scrutiny, particularly given the intensifying competition from rivals like Google (GOOGL) and Microsoft (MSFT), both of which had recently reported their own quarterly results. Google Cloud reported revenue growth of 34% during the third quarter, while Microsoft Azure recorded an even stronger growth rate of 40%. Amazon’s ability to deliver 20% growth amid this competitive landscape highlights its continued market leadership and the stickiness of its cloud offerings.

Before the report, Amazon’s stock had only risen 1.6% year-to-date, lagging behind its megacap peers. The market had become increasingly concerned about whether Amazon was positioned to capture the growing number of highly lucrative AI deals for cloud services, especially given announcements from competitors securing deals with companies like Meta.

However, Amazon is demonstrating its commitment to AI through aggressive capital expenditure. The company raised its capital expenditure forecast for the year, now anticipating spending of $125 billion in 2025, an increase from the previous estimate of $118 billion. CFO Brian Olsavsky indicated that this figure is likely to increase further in 2026. While Google, Meta, and Microsoft also increased their capex guidance, their projections remain below Amazon’s, suggesting a significant investment in infrastructure to support its AI ambitions.

For the current quarter, Amazon projects sales in the range of $206 billion to $213 billion. The midpoint of this revenue outlook, $209.5 billion, exceeds analyst estimates of $208 billion, according to LSEG data. This positive guidance indicates strong demand heading into the holiday shopping season.

Despite the positive financial performance, the week has been challenging for a significant portion of Amazon’s workforce. On Tuesday, the company announced plans to lay off 14,000 corporate employees as part of a restructuring effort to streamline operations and reduce bureaucracy, thereby enabling faster decision-making and innovation. While further cuts are anticipated, CEO Andy Jassy emphasized that these actions are not solely driven by financial pressures or the immediate impact of AI.

“The restructuring is primarily about culture and efficiency,” Jassy explained. “Rapid growth over the past several years led to increased complexity, layers of management, and a higher headcount. We are focused on simplifying our organizational structure to become more agile and innovative.”

Amazon concluded the quarter with approximately 1.58 million employees, representing a 2% increase compared to the same period last year.

Sales in Amazon’s core online stores unit increased by 10% during the quarter, boosted in part by the Prime Day discount event in July. This demonstrates that despite rising competition, Amazon remains a dominant force in online retail through its scale, logistics, and Prime membership program.