Amazon's Cloud Business Grows Fastest in Five Years, but the Stock Still Drops

Keypoints:

• AWS revenue grew 39% to $46.0 billion, its fastest growth in nearly five years
• Amazon's total revenue rose 12% to $201.9 billion, but earnings per share of $1.89 missed the $1.97 forecast
• Operating income hit $28.1 billion, a record 13.9% margin
• CEO Andy Jassy expects AWS growth above 40% in both 2027 and 2028
• Shares fell 4% during the day and then dropped 7% to 11% after hours

Amazon had a good quarter and a bad reaction on Thursday. The cloud business is booming, but investors were looking at what Amazon is spending to keep it going.

The star was Amazon Web Services. Its revenue climbed 39% to $46.0 billion, the fastest pace in nearly five years. It is now running at a $184 billion a year pace. AWS also earned $17.8 billion in operating profit, with a margin of 38.7%. CEO Andy Jassy said the investments are working and that he expects AWS to grow more than 40% in both 2027 and 2028.

Across the whole company, operating income was $28.1 billion, above even the top of Amazon's own forecast. The operating margin of 13.9% was the highest in Amazon's history. Advertising brought in $19.6 billion. Amazon also said its retail sales over the past 12 months came to nearly $500 billion.

So why did the stock fall? The headline numbers missed. Revenue of $201.9 billion came in just under the $202.2 billion analysts expected, and earnings per share of $1.89 fell short of $1.97. Higher interest costs on Amazon's growing debt and other losses ate into profit. 

Part of the revenue gap came from timing. Prime Day moved into the second quarter this year, and Amazon said growth would have been about four percentage points higher without that shift. North America sales rose 6% and international sales rose 5%.

Then there is the cost of growth. Amazon is holding its 2026 capital spending at roughly $220 billion, mostly to build AI computing capacity. Its stock had already slid 4.25% to $243.79 before the report, and it fell further after the numbers came out.

The pattern is the same one seen at Alphabet this week. Investors love cloud growth, but they are nervous about huge spending and cash flow. For the holiday quarter, Amazon guided sales of $240 billion to $247 billion.