HCA Red Flag: Amazon's Q4 guidance disappoints, even though AWS is expected to grow over 40% (AI)
HC Andersen Capital
Summary
- Amazon's Q4 operating profit guidance is below expectations, with a midpoint of 31.0 BUSD compared to the expected 32.9 BUSD, contributing to a 6% drop in after-hours trading.
- Investments significantly exceeded expectations at 75.9 BUSD versus the anticipated 58.5 BUSD, leading to a negative free cash flow of minus 42.4 BUSD and increased interest expenses.
- Amazon's AWS cloud business is expected to grow over 40% in 2027 and 2028, with current growth at 39%, the fastest in nearly five years, potentially improving future sentiment.
- Despite rising depreciation costs, AWS maintained a strong margin of 38.7%, and Amazon's overall operating profit exceeded expectations with a record margin of 13.9%.
This content is generated by AI. You can give feedback on it in the Inderes forum.
Automatic translation: Originally published in Danish 29/10/2026, 20:13 GMT. Give feedback here.
Red Flag · First read on the report · AI-generated content · shares are already trading
HCA Red Flag: Amazon's Q4 guidance disappoints, even though AWS is expected to grow over 40% (AI)
Amazon.com (AMZN) · Q3 2026 · October 29
Shares up 8% over three months, at least 8% below the August record
| Overall assessment | Negative assessment |
| Positive view | Balanced | Negative view |
The share is trading 6% lower in after-hours trading at 9:16 PM Danish time; the likely reason is Q4 operating profit guidance below the expected 32.9 BUSD and investments above expectations. Over 40% growth in the AWS cloud business in 2027 and 2028, as expected by CEO Andy Jassy, could turn sentiment around.
Red flags in the report
The Q4 guidance is below expectations
Midpoint 31.0 BUSD · Expected 32.9 BUSD
Only the top of the operating profit range, 33.5 BUSD, is above analysts' expectations. A low midpoint contributed to a share price drop of over 5% in February, and analysts' figures for the holiday quarter could be decreased.
Investments were well above expectations in the quarter
Actual 75.9 BUSD · Expected 58.5 BUSD
Amazon borrowed 48 BUSD in the quarter, and 12-month free cash flow fell to minus 42.4 BUSD. Interest expenses rose to 1.7 BUSD, contributing to earnings per share missing expectations.
Advertising sales grew by only 11% and disappointed
Actual 19.6 BUSD · Expected 20.8 BUSD
Amazon points out that Prime Day, the annual discount event, moved to Q2, and expects higher growth in Q4. If the explanation does not hold up, estimates for the advertising business will have to be cut.
Green flags in the report
Amazon expects over 40% AWS growth in 2027 and 2028
Actual 46.0 BUSD · Expected 45.4 BUSD
AWS, Amazon's cloud business, grew by 39%, the fastest in nearly five years, and CEO Andy Jassy expects over 40% in both years. The new, concrete guidance could lift estimates for AWS over the next two years.
Operating profit beat expectations with a record margin
Actual 28.1 BUSD · Expected 26.1 BUSD
The group's operating margin of 13.9% is a record high, and North America held at 7.7% despite the shift of Prime Day. This is the third consecutive quarter above the top of the guidance, making the cautious Q4 guidance weigh less.
The AWS margin held up despite rising depreciation
Now 38.7% · Q2 ca. 38.1% excluding one-off gain
The group's depreciation rose by 25% to 20.9 BUSD, but AWS earned 17.8 BUSD, 55% more than the previous year. This eases fears that data centers and more expensive memory chips are squeezing earnings in AWS.
Disclaimer: This is an HCA AI-generated research commentary based solely on the company's published financial report. The commentary does not constitute investment consulting and should not be used as the sole basis for investment decisions. Investing in shares involves the risk of loss. Seek professional consulting. /HC Andersen Capital, 9:17 PM, October 29, 2026