Amazon cloud growth beats Wall Street expectations, Intel data centers strong: Why did both earnings reports still disappoint investors?

Why did accelerating AWS growth still fall short of buy-side expectations?

Amazon’s third-quarter AWS revenue was 46 billion dollars, up 39.3% year over year, above Wall Street’s expectation of 37.7% but below the buy-side threshold of about 43%. Growth accelerated from 36.7% in the second quarter, and revenue increased by 3.75 billion dollars sequentially, below the record 4.6 billion dollars in the second quarter.
AWS operating margin was 38.7%, above Wall Street’s expectation of 37.3% but below the buy-side threshold of about 40% and the second quarter’s 39.4%. However, the second quarter included about 600 million dollars in gains on energy derivatives; excluding those gains, the margin was 38.1%.
Amazon CEO Jassy expects AWS growth to exceed 40% in both 2027 and 2028. Using the approximately 175 billion dollars in 2026 revenue assumed in the report, growth of 40% in 2027 would imply approximately 245 billion dollars, about 9 billion dollars above Wall Street’s expectation at the time.

Net cash capital expenditures in the third quarter were 75.9 billion dollars, up 122% year over year, above Wall Street’s comparable expectation of 58.2 billion dollars and the second quarter’s 53.1 billion dollars. The company maintained its full-year 2026 cash capital expenditure forecast of approximately 220 billion dollars; subtracting the cumulative 172.2 billion dollars in the first three quarters implies approximately 47.8 billion dollars in the fourth quarter.
Third-quarter operating cash flow was 42.4 billion dollars. After capital expenditures, free cash flow was negative 33.5 billion dollars, compared with Wall Street’s prior expectation of positive 1.3 billion dollars. Free cash flow over the past 12 months fell to negative 42.4 billion dollars from negative 7.6 billion dollars at the end of the second quarter. The company added 48.1 billion dollars in long-term debt in the third quarter, bringing total long-term debt to 173.1 billion dollars at quarter-end, compared with 65.6 billion dollars at the end of 2025.
The group’s third-quarter operating profit was 28.1 billion dollars, above Wall Street’s expectation of 26.2 billion dollars, but GAAP earnings per share were 1.89 dollars, below the expected 1.97 dollars. Interest expense rose from 540 million dollars a year earlier to 1.69 billion dollars; the prior-year quarter also included 9.5 billion dollars in Anthropic-related gains.

Third-quarter group revenue was 201.9 billion dollars, up 12.1% year over year and below Wall Street’s expectation of 202.35 billion dollars. Advertising revenue was 19.6 billion dollars, up 10.9%, below the expected 20.9 billion dollars and 18% growth rate. Even combining the second and third quarters, advertising growth of 18.1% remained below the expected 21.9%.
The company attributed the advertising performance to timing factors such as Prime Day and expects fourth-quarter advertising revenue growth in the high end of the 10% to 20% range. Group fourth-quarter revenue guidance is 240 billion to 247 billion dollars, and operating profit guidance is 28.5 billion to 33.5 billion dollars; the midpoint of each range is below Wall Street expectations.

Intel’s third-quarter data center and AI revenue was 7.32 billion dollars, up 78% year over year and above Wall Street’s expectation of 6.59 billion dollars. But client computing revenue was 8.1 billion dollars, down 5% year over year and 9% sequentially, below the expected 8.89 billion dollars. The CFO expects the PC market slowdown to last at least through the first half of 2027.
The company’s fourth-quarter revenue guidance is 15 billion to 16 billion dollars. The midpoint of 15.5 billion dollars is 6.1% below the third quarter and below Wall Street’s expectation of 16.98 billion dollars. Non-GAAP gross margin guidance is 38%, below the third quarter’s 44.1% and market expectations of about 42.5%; non-GAAP earnings per share guidance is 0.25 dollars, below the expected 0.43 dollars.
Third-quarter operating cash flow was 5.1 billion dollars, below Wall Street’s expectation of 6.22 billion dollars. Capital expenditure in the first three quarters was 11.8 billion dollars; based on full-year guidance of more than 20 billion dollars, fourth-quarter spending will exceed 8.2 billion dollars. The company has completed 23 billion dollars in equity financing and had 54 billion dollars in cash and short-term investments.