Amazon Q3 Earnings Breakdown: AWS Growth, Heavy Capex, and the Free Cash Flow Debate

Evercore's head of internet research, Mark Mahaney, joins the discussion to unpack Amazon's third-quarter results, which fell short of expectations while the company maintained its aggressive AI-related capital expenditure plan of about $220 billion for the year. The conversation examines why the market reacted negatively and addresses each of the three main concerns raised by the numbers.

■ Market Reaction and the Three Key Disappointments
- Why AWS growth of 39% was seen as a miss versus the low-40s% the market expected
- Ad revenue growth coming in below investor expectations
- Record negative free cash flow running well above the street's estimate

■ Reading the Fundamentals
- AWS revenue growth accelerating for a sixth straight quarter, with margins near 40%
- The company's stated multi-year AWS growth targets and order backlog expansion
- Record operating margins and operating cash flow at the corporate level

■ Looking Ahead
- The expected trajectory of free cash flow losses and when investors might see a turning point
- Project Leo's upcoming commercial launch and its potential P&L impact
- What would need to happen for the stock to re-rate, along with a discussion of profitability visibility for the spending cycle

Investors and analysts tracking large-cap tech earnings will find a structured walkthrough of how to separate an expectations correction from a fundamentals correction, along with the specific metrics and timeframes being monitored. The segment covers Amazon's cloud, advertising, and capital spending outlook in detail and can serve as a reference point when evaluating the company's next earnings reports.