Amazon set to report third-quarter earnings as Wall Street zeroes in on AI spending

Amazon is scheduled to deliver its third-quarter earnings report after the market closes on Thursday. Analysts surveyed by LSEG are looking for adjusted earnings per share of $1.96 on revenue of $202.31 billion.

Beyond the headline figures, Wall Street is tracking two closely watched segments. Amazon Web Services is expected to post revenue of $45.48 billion, while the advertising unit is projected to bring in $20.82 billion, according to StreetAccount estimates.

Investors anticipate another strong quarter from the cloud division. AWS sales are forecast to climb 38%, per StreetAccount, up from a 37% increase in the prior quarter. That would represent the fifth consecutive quarter of accelerating revenue growth for the unit.

That momentum shows no sign of fading, according to CEO Andy Jassy, who said Amazon's cloud capacity is "largely sold out" for next year, with significant commitments already booked for 2028. "We always leave a certain amount for on demand and our inference service Bedrock or EC2, but largely sold out all the big chunks," Jassy said on an Andreessen Horowitz podcast last week. "A good chunk of '28 is sold out."

Executives are likely to face questions about the cost of keeping up with that demand. Last quarter, Amazon raised its 2026 capital expenditure forecast to $220 billion from $200 billion, and analysts polled by StreetAccount expect capex to exceed $280 billion in 2027. The company has raced to bring new data centers online to serve surging appetite for AI computing power, and the spending has pressured its finances. In July, Amazon reported negative free cash flow of $7.6 billion for the trailing twelve months, compared with positive free cash flow of $18.2 billion a year earlier. FactSet estimates point to a $9.9 billion outflow in the current quarter. Alphabet and Meta also posted negative free cash flow in their latest reports, while Microsoft said Wednesday its free cash flow fell 27% in its fiscal first quarter, though it stayed positive, unlike its hyperscaler peers.

As AI outlays rise, Amazon has continued to shrink its workforce. The company has cut more than 57,000 jobs since 2022, amounting to roughly 16% of its corporate staff, with reductions continuing this year through smaller rolling rounds. On Wednesday, Amazon confirmed it laid off some employees in its device software and services team to "operate more efficiently and better align with our product roadsmap," a spokesperson told CNBC. Fewer than 250 workers were affected, the company said.

During the quarter, Amazon drew attention when it blocked Meta's Muse AI agent from shopping on its platform, saying it received no advance notice that Muse would access its webstore and never agreed to participate. The move fits Amazon's broader approach to outside agents: it has blocked dozens of them, including Perplexity, which Amazon sued last year over allegations the startup disguised its AI shopping bots.

At the same time, Amazon has poured resources into its own offerings. In May, it rebranded its Rufus AI shopping chatbot as Alexa for Shopping. The company said Thursday that more than 400 million shoppers have used the assistant, and that usage of its agentic features has "grown more than eight times since the start of the year." The tool now supports more than 100 shopping-related capabilities, including building gift lists, managing subscriptions and handling account changes.

The push comes as Meta and OpenAI expand their own AI shopping products, which some analysts see as a threat to Amazon's digital advertising business because shoppers researching or buying through outside agents may bypass sponsored listings on Amazon's site. "We expect Amazon to eventually develop its own agentic shopping offering, with its proprietary purchase data and commerce infrastructure positioning it well," Deutsche Bank analysts wrote in a note last week. "The key question is whether Amazon can accommodate third-party agents on terms that preserve attractive monetization."