Amazon Q3 earnings updates: 20% AWS cloud sales growth and earnings beat drive stock surge

Jassy said that Tuesday’s layoffs were “not financially driven.” Instead, he said, it’s about culture.

Amazon grew its head count over the past few years, which “can weaken the ownership” of Amazon employees who “are doing the actual work” and slow down key decisions, Jassy said. He added that Amazon wants a flat, fast organization.

Jassy said Whole Foods is growing faster than most grocery chains. He also told analysts to expect more locations for Whole Foods Daily Shop, the chain’s latest small-format grocery.

Amazon is “most excited about” the ability to deliver perishable groceries for same-day delivery. Jassy added that the ability to order fresh foods multiple times a week for delivery, like Amazon provides, is part of the reason more customers are avoiding a weekly stock-up.

Jassy said that Amazon will always offer customers multiple chip options, including those from rivals like Nvidia.

At the same time, he said, Amazon’s in-house chips make it different from other tech players. Amazon’s Trainium chips, including its Trainium 3, will offer customers better value, especially as they try to use AI more broadly, he said.

The first question asked how capacity-constrained AWS is right now.

Jassy said that Amazon increased capacity during the quarter. The company plans to double its capacity by the end of 2027.

There’s also lots of interest from customers in Amazon’s Trainium chip, Jassy said.

Amazon expects capital expenditures of about $125 billion for 2025, CFO Olsavsky said. That’s above the $118.76 billion that analysts polled by Bloomberg were expecting.

That will increase in 2026, he adds.

For the third quarter, Amazon’s capex was $34.2 billion.

Jassy highlighted the fourth quarter as a key one for Amazon, with the holiday shopping season and AWS’s re:Invent conference scheduled for December, before handing the call over to CFO Brian Olsavsky.

Jassy said that Amazon sees opportunities to grow advertising around Prime Video, adding that live sports have gotten a lot of interest from advertisers.

For the third quarter, advertising services net sales rose 24% to $17.7 billion.

Jassy said Rufus had 250 million active users this year, and that customers using Rufus during a shopping trip were 60% more likely to complete a purchase.

Amazon is on track to beat its delivery speed record again this year for Prime members, Jassy said.

Jassy said a new option that lets customers add items to orders they’ve already scheduled has been used 80 million times.

Jassy highlighted how some Amazon agentic coding tools have saved time and money for its clients.

Kiro, for example, attracted about 100,000 developers in an initial preview, and the number of users is now more than double that.

Amazon CEO Andy Jassy kicked off the call by talking about AWS, teasing unannounced deals worth more than all new deals in its third quarter.

He also briefly mentioned that Amazon’s competitors have smaller annual revenue than AWS does.

CEO Andy Jassy, CFO Brian Olsavsky, and head of investor relations Dave Fildes are kicking it off with prepared remarks.

Shares of Amazon are 11% higher in after-hours trading as the company’s earnings call is about to begin.

Amazon grew the number of rural communities that had access to same-day and next-day delivery by 60% over the past four months, it said in its earnings release.

The e-commerce giant is increasingly competing with Walmart and Dollar General as it offers faster delivery in small towns and other sparsely populated parts of the US.

Amazon’s earnings show that the company is “firing on all cylinders after a year of relative underperformance,” Ethan Feller, stock strategist at Zacks Investment Research, said on Thursday afternoon.

The results are also a good sign for Amazon’s standing in relation to the other Big Tech stocks, Feller said.

“Despite lagging the Magnificent Seven and the broader market for much of 2025, the company’s fundamentals never meaningfully weakened,” Feller wrote. “This banner quarter could mark a turning point for investor sentiment and set the stage for Amazon to reclaim a leadership role among large-cap tech stocks heading into year-end.”

Amazon’s third-quarter results show the company is making progress in adding AI to its operations, Investing.com’s senior analyst Jesse Cohen said.

“Although AWS sales fell slightly short of projections, the division still achieved its fastest growth pace since 2022, underscoring the robust demand for cloud services,” Cohen wrote.

He added: “As AI continues to play a pivotal role in Amazon’s trajectory, the company is well-positioned for continued innovation and expansion.”

Amazon shares were up more than 9% after the company reported its earnings Thursday afternoon.

One factor could be CEO Andy Jassy’s comments on AWS.

“AWS is growing at a pace we haven’t seen since 2022, re-accelerating to 20.2% YoY,” Jassy said in Amazon’s earnings release. “We continue to see strong demand in AI and core infrastructure, and we’ve been focused on accelerating capacity — adding more than 3.8 gigawatts in the past 12 months.”

Amazon’s third quarter included two big one-time charges. The first is $1.8 billion in estimated severance costs “primarily related to planned role eliminations.”

The other was its previously announced $2.5 billion settlement with the FTC over its Prime membership program.

Third quarter results:

• Net sales: $180.2 billion, +13% y/y vs. estimate $177.82 billion
• EPS: $1.95 vs. y/y, estimate $1.58
• Online stores net sales: $67.4 billion, +10% y/y vs. estimate $66.93 billion
• Physical Stores net sales: $5.58 billion, +7 y/y vs. estimate $5.56 billion
• Third-Party Seller Services net sales: $42.49 billion, +12% y/y vs. estimate $42.05 billion
• Subscription Services net sales: $12.57 billion, +11% y/y vs. estimate $12.49 billion
• Amazon Web Services net sales estimate: $33 billion, +20% y/y vs. $32.39 billion
• North America net sales estimate: $106.3 billion, +11% y/y vs. $104.96 billion
• International net sales: $40.9 billion, +14% y/y vs. estimate $40.77 billion
• Operating income: $17.4 billion vs. estimate $19.72 billion
• Operating margin: 9.7% vs. estimate 11.1%

Fourth quarter guidance:

• Net sales: $206 billion to $213 billion vs. estimate $208.45 billion
• Operating income: $21 billion to $26 billion vs. estimate $23.78 billion

Source: Bloomberg and company filings

Amazon’s Prime Day event in October has become an early chance for shoppers to score holiday deals, and other retailers have even debuted their own versions. On Thursday’s call, Amazon could provide an early glimpse into how holiday shopping is shaping up.

Expect Amazon to play a big role once the holiday shopping season starts in earnest. About 73% of shoppers surveyed by marketing platform Omnisend said that Amazon is their go-to source for deals on Black Friday and Cyber Monday.

Amazon’s ad business has been finding potential growth opportunities lately.

A recent deal with Netflix will let brands buy ad slots on the streamer through Amazon’s own demand-side platform. The move rattled shares of adtech rival The Trade Desk after it was announced.

Amazon is expected to give a capital expenditures update on its earnings call this afternoon. Last quarter, Amazon’s capex totaled $31.4 billion, and the company said the figure was “reasonably representative” of its quarterly capex rate for the rest of the year. It’s largely driven by investments in AWS — particularly AI and tech infrastructure — and Amazon’s fulfillment and transportation network.

Capex growth is a hot-button issue across Big Tech. The following chart shows how spending stacks up so far.

Investors will be listening for any details that CEO Andy Jassy and the company offer about Amazon’s grocery business in light of a recent reboot.

In June, a memo obtained by Business Insider showed that Whole Foods, Amazon Fresh, and Amazon Go were being united under a single “One Grocery” operation eight years after Amazon acquired Whole Foods for $13.7 billion.

The company launched a $5 private-label grocery line earlier this month aimed at luring value hunters away from Walmart and Aldi.

Wedbush has high hopes for the tech giant heading into the call, maintaining a $280 price target, up from its previous target of $250 a share.

The firm’s analysts predict that it is poised for a breakout in 2026 and likely to shake off the volatility that has weighed on the stock recently. They expect Amazon to reach $99.6 billion in full-year revenue, and predict Q3 revenue of $20.1 billion.

“Heading into the print, we are most focused on AWS momentum and emerging AI monetization, rising operating margins supported by the mix shift to higher-margin revenue, capex requirements to support infrastructure and AI investments, and persistent growth within the advertising business,” Wedbush analysts wrote in a preview note.

They also cited several immediate-term catalysts, including savings from automation and robotics progress, and the commercialization of Alexa’s new AI capabilities.

Business Insider’s Chief Tech Correspondent Eugene Kim and Chief Correspondent Aki Ito will join Deputy Executive Editor Dan DeFrancesco to talk about Amazon’s decision this week to lay off 14,000 employees in a livestream at 2 p.m. ET. AI’s role in the layoffs will be a key topic.

Got a question that you want the panel to answer? Send it to moderator Dan DeFrancesco.

Amazon said on Tuesday that it would cut 14,000 corporate jobs in one of the biggest rounds of layoffs in the company’s history.

It raised a big question for Wall Street: Is the company cutting jobs because growth is stalling, or is the retail giant’s big bet on AI making it more efficient? Business Insider’s Alistair Barr wrote in Thursday’s Tech Memo newsletter that Amazon’s latest quarterly earnings report could answer that all-important question.

Revenue growth for Amazon Web Services, the company’s crucial cloud business, is the number to watch when Amazon reports this afternoon, Barr wrote.

For the third quarter, Wall Street expects AWS revenue to increase 18% year over year to $32.4 billion, according to Bloomberg.

UBS analysts are feeling optimistic heading into the report, although they anticipate some “noise” around operating income due to the company’s recent $2.5 billion settlement with the FTC.

The bank recently raised its price target for Amazon stock from $271 to $279, maintaining its Buy rating. While analysts said that they are waiting to see investment proof points from AWS, they still see the area as a likely growth driver for Amazon, as they expect multiple headwinds to wane in the near future.

“Overall, we continue to see the potential for upside across Amazon’s business segments, including e-commerce, cloud, advertising, and Kuiper / low earth orbit satellites,” analysts wrote in a recent earnings preview.

Investors will want to hear more about AWS’s latest AI strategy, including what it’s doing to attract new customers.

Early-stage startups are skipping traditional cloud spending and heading straight to model-training tools and niche providers. These companies are Amazon’s “blind spot,” according to an internal document seen by Business Insider. Amazon has traditionally relied on venture capital firms to find startups that could be new clients.

AWS also hired a new vice president of security services and observability this month, a sign that the unit is trying to improve security around its AI products.

JPMorgan analysts said that while they believe Amazon has done a good job executing on retail sales and margin expansion, they’re worried about its positioning in the booming generative AI space.

“There is concern around AMZN’s GenAI positioning/strategy, relative gap to Azure/Google Cloud growth, & trajectory of 2H AWS growth pick-up,” they said. “There is also concern around the impact of tariffs & changes to the de minimis exemption on demand & OI margins.”

However, the analysts add that AWS growth acceleration will likely continue, and said that they expect AI supply chain gaps to ease, which they see as bullish for Amazon.

JPMorgan maintains an overweight rating and a $265 price target for Amazon stock.

Amazon ranks last among the Magnificent Seven tech companies — and the broader S&P 500 — when it comes to stock performance over the last five years, Business Insider’s Joe Ciolli wrote in Thursday’s First Trade newsletter.

Amazon’s stock has returned 43% over that period, behind Meta’s 168%, Alphabet’s 253%, and Nvidia’s mammoth 1,490%.

On Wall Street, some interpret Amazon’s position on that chart as a sign that its AI strategy is struggling to compete with rivals.

BofA analysts are upbeat heading into the report, even as doubts swirl around Amazon’s AI strategy.

“Given healthy retail sales, strength in Online advertising, and July AWS layoffs, we see potential for operating income upside and are 4% above Street for GAAP operating profit at $20.4bn vs $19.7bn,” the analysts wrote.

“We believe Street expectations are for around 1-2% beat on US retail, AWS growth at 18-18.5% based on 3P data, and op. profit slightly above the high end of Amazon’s 3Q guidance range.”

The bank maintains a Buy rating on Amazon stock and a $272 price target, implying 21% upside from Wednesday’s price.

Third Quarter

• Net sales estimate $177.82 billion
• Online stores net sales estimate $66.93 billion
• Physical Stores net sales estimate $5.56 billion
• Third-Party Seller Services net sales estimate $42.05 billion
• Subscription Services net sales estimate $12.49 billion
• Amazon Web Services net sales estimate $32.39 billion
• North America net sales estimate $104.96 billion
• International net sales estimate $40.77 billion
• Third-party seller services net sales excluding F/X estimate
  +10.8%
• Subscription services net sales excluding F/X estimate +10.7%
• Amazon Web Services net sales excluding F/X estimate +17.9%
• EPS estimate $1.58
• Operating income estimate $19.72 billion
• Operating margin estimate 11.1%
• North America operating margin estimate +6.98%
• International operating margin estimate 4.02%
• Fulfillment expense estimate $27.49 billion
• Seller unit mix estimate 60.7%

Fourth Quarter

• Net sales estimate $208.45 billion
• Operating income estimate $23.78 billion
• Capital expenditure estimate $32.33 billion

Year

• Capital expenditure estimate $118.76 billion

Source: Bloomberg