Andy Jassy's Amazon sank after hours on a $42.4 billion cash outflow, capping Alphabet's worst day on record

Thursday was the day the market stopped giving AI spenders the benefit of the doubt. It started with Alphabet and ended with Amazon, and in between the Nasdaq Composite lost 365.13 points, or 1.37%, to 26,184.72, according to Reuters.

Alphabet closed down 12.64% at $283.82, according to Yahoo Finance data, a fall that Kiplinger called the stock's worst day ever and Reuters described as its steepest one-day decline on record. At midday, Reuters said the Google parent was on track to lose more than $464 billion in market value.

Then, minutes after the closing bell, Amazon reported. Shares fell more than 7% in extended trading, CNBC reported. TheFly put the decline at 9%, to $221.87, and StockTitan data showed the stock 11.4% below its regular-session close shortly after 4 p.m. ET. Amazon had already closed down 4.25% at $243.79 during the day.

A narrow miss, and a big cash number

Amazon earned $1.89 a share on revenue of $201.94 billion, according to CNBC. Analysts polled by LSEG had expected $1.96 and $202.31 billion. Revenue rose 12% from a year earlier, while net income slipped 2% to $20.7 billion, which Amazon attributed mainly to a $9.5 billion gain on its Anthropic investment in the year-earlier quarter, StockTitan reported.

The headline that moved the stock was cash. Amazon posted negative free cash flow for the second quarter in a row, with an outflow of $42.4 billion over the trailing 12 months, up 386% from a year earlier, CNBC said. The company said the shortfall came mainly from buying property and equipment for AI. It kept its forecast for 2026 capital spending at about $220 billion.

Advertising also came in light: $19.64 billion against the $20.82 billion StreetAccount estimate, according to CNBC. For the fourth quarter, Amazon guided revenue to $240 billion to $247 billion, in line with the $244.5 billion LSEG consensus.

AWS: the part that went right

Amazon Web Services grew 39% to $45.98 billion, ahead of the $45.29 billion StreetAccount forecast, CNBC reported. Amazon's release called it the fastest growth in nearly five years, and operating income rose 61% to $28.1 billion for an operating margin of 13.9%, the highest in the company's history, according to Techmeme and 24/7 Wall St.

"Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028." - Andy Jassy, Amazon president and CEO, in the earnings release, as quoted by Benzinga

Jassy added, according to Benzinga: "There has never been a trillion-dollar revenue business, and we may have two of them in the next five to 10 years."

Why Alphabet set the tone

Alphabet's report late Wednesday showed revenue of $127.58 billion and adjusted earnings of $2.67 a share, both short of estimates, along with negative free cash flow of $9.07 billion, CNBC reported. Kiplinger said it was the company's first double miss since the fourth quarter of 2022, and that long-term debt had climbed to $125.1 billion from $21.6 billion a year earlier as the company borrows to fund AI.

Reuters framed Thursday's trading as investors sorting companies that can fund their AI plans from cash flow from those that burn cash and borrow to do it. Alphabet landed in the second group. Microsoft, which kept its free cash flow positive in results released Wednesday, closed down 0.16% at $530.14, according to Yahoo Finance data, after media reports that it plans to raise at least $25 billion through a bond sale, Reuters said.

Intel: a beat, then a soft outlook

Intel also reported after the close. Third-quarter revenue rose 21% to $16.5 billion, and adjusted earnings of 52 cents a share beat the 41-cent consensus cited by TipRanks. Revenue in its data center and AI unit jumped 78% to $7.3 billion, according to the company's release.

The outlook was the problem. Intel guided fourth-quarter revenue to $15 billion to $16 billion and adjusted earnings to 25 cents a share, below estimates of $17.06 billion and 44 cents, according to TipRanks. The shares fell sharply in extended trading after closing down 3.62% at $92.07 in the regular session.

"We see the PC slowdown continuing at least through the first half of next year." - David Zinsner, Intel CFO, in the company's earnings release

What carries into Friday

After-hours prices can shift before the regular session opens, so Friday's trading gives the first full read on Amazon and Intel. Apple, the next megacap on the calendar, has scheduled its fiscal fourth-quarter results for Monday, Nov. 2, according to its investor relations announcement as reported by AppleInsider.

For now, the message from Thursday's tape was consistent: growth alone was not enough. Investors wanted to see the spending come back as cash.