Amazon and Alphabet Miss Q3 Estimates as AI Spending Drains Cash

Two of the largest companies in the S&P 500 handed Wall Street back-to-back earnings misses this week, and in both cases the culprit was the same: AI infrastructure spending that is consuming cash faster than operations can replenish it.

Amazon reported third-quarter results after the close Thursday. <cite index="12-1">The company posted earnings of $1.89 per share on revenue of $201.94 billion, missing the consensus estimate of $1.97 per share.</cite> <cite index="17-4">Total revenue rose 12% on a year-over-year basis.</cite> The headline numbers were close to the mark. The cash flow statement was not.

<cite index="15-9,15-10">Free cash flow fell to a negative $42.4 billion for the trailing 12 months, compared with positive free cash flow of $14.8 billion for the trailing 12 months ended September 30, 2025.</cite> <cite index="17-6">Operating cash flow itself rose 29% to $168.3 billion, but the gain was overwhelmed by a year-over-year increase of $94.8 billion in purchases of property and equipment.</cite> <cite index="11-5">The company held its 2026 capital expenditure forecast at $220 billion.</cite>

The one number bulls can point to is AWS. <cite index="17-5">Amazon Web Services brought in $46 billion, up 39%, its fastest growth rate in almost five years, with AWS operating income rising to $17.8 billion from $11.4 billion a year earlier.</cite> CEO Andy Jassy, per the earnings release reviewed by Benzinga, projected AWS revenue growth rates above 40% in both 2027 and 2028. Traders weren't buying the forward guidance at face value. <cite index="14-3">Amazon shares fell 4.25% in regular trading Thursday and dropped another 6.11% after hours.</cite>

A day earlier, Alphabet delivered a similar structure: strong cloud growth buried under a cash flow hole and a profit miss that caught analysts off guard. <cite index="23-1">The Google parent missed Q3 expectations on both earnings and revenue, its first top-and-bottom-line miss in nearly four years.</cite> <cite index="23-8">Adjusted earnings per share came in at $2.67 against a $3.02 consensus, on revenue of $127.58 billion versus $128.22 billion expected, according to LSEG.</cite>

<cite index="24-4">Google Cloud delivered what the company called record growth, with revenues up 103% to $30.7 billion, led by enterprise AI infrastructure and AI solutions.</cite> But the quarter's free cash flow told a different story. <cite index="26-7">Alphabet reported negative free cash flow of $9.07 billion for the third quarter, well below the $2.70 billion analysts had anticipated.</cite> <cite index="23-6">The company maintained its full-year capex forecast after lifting guidance to between $195 billion and $205 billion in Q2, and said it expects a significant further increase in 2027.</cite>

<cite index="27-3,27-4">Alphabet stock fell more than 12% Thursday, putting it on track for its worst single-day decline since the company went public in 2004.</cite>

The pattern across both reports is consistent: operating income is growing, cloud units are accelerating, but the capital outlay required to sustain that acceleration is outrunning cash generation by a margin that the market is no longer willing to treat as a rounding error. <cite index="7-7">The Stoxx 600 Technology index fell 1.9% Friday as European tech stocks joined a global rout on the back of the disappointing U.S. results.</cite>

For both companies, the question analysts will press on the next call is the same one the sell-side is already circulating: at what point does capex peak, and what is the normalized return on the spend already committed? Neither management team offered a specific answer this week. That absence is, in itself, information.

Sources cited:
- CNBC, Amazon Q3 2026 earnings report (https://www.cnbc.com/2026/10/29/amazon-amzn-q3-earnings-report-2026.html)
- MarketBeat, Amazon Q3 2026 earnings results (https://www.marketbeat.com/earnings/reports/2026-10-29-amazoncom-inc-stock/)
- TechCrunch, Amazon Q3 booming cloud revenue, missed expectations (https://techcrunch.com/2026/10/29/amazon-reported-booming-cloud-revenue-but-otherwise-missed-expectations/)
- Benzinga, Amazon Q3 double miss (https://www.benzinga.com/markets/earnings/26/10/62719400/amazon-delivers-q3-double-miss-aws-growth-accelerates-shares-drop)
- CNBC, Alphabet Q3 2026 earnings (https://www.cnbc.com/2026/10/28/alphabet-googl-earnings-q3-2026.html)
- CNBC, Alphabet Q3 analyst reaction (https://www.cnbc.com/2026/10/29/alphabet-q3-earnings-analyst-reaction.html)
- Alphabet Inc. Form 8-K, Q3 2026 (SEC filing) (https://www.sec.gov/Archives/edgar/data/0001652044/000165204426000080/googexhibit991q32026.htm)
- Yahoo Finance, Alphabet Q3 earnings miss (https://finance.yahoo.com/technology/article/google-q3-sales-fall-short-of-expectations-stock-plunges-201134250.html)
- CNBC, Nasdaq-100 futures live updates (https://cnbc.com/2026/10/29/stock-market-today-live-updates.html)