The Beat

Amazon delivered strong results across every major business segment.

Total sales climbed 13% to $180.17 billion, topping the $177.8 billion estimate. Earnings per share hit $1.95, crushing the $1.57 consensus. The stock jumped 12% Friday on the news.

AWS was the star performer. Cloud revenue grew 20% to $33 billion, exceeding expectations. The division generated $11.4 billion in operating income - accounting for roughly two-thirds of Amazon's total operating profit.

Digital advertising, another growth engine, jumped 24% to $17.7 billion. Amazon is proving it can compete with Google and Meta in the advertising space.

The Cloud Competition

Coming into earnings, investors worried about AWS losing ground to Google and Microsoft.

Google's cloud revenue increased 34% during Q3. Microsoft Azure recorded 40% growth. Those numbers seemed to suggest Amazon was falling behind in the AI-driven cloud boom.

But AWS still generates far more revenue and profit than competitors. The $33 billion in quarterly revenue and $11.4 billion in operating income dwarf what Google Cloud produces.

Pivotal Research analysts wrote that Amazon "has a deep moat around their core businesses driven by their unmatched scale" and "appears to have numerous healthy organic growth opportunities driven by their high margin AWS cloud segment."

The Spending Story

Amazon is spending more on AI infrastructure than anyone else.

The company raised its 2025 capital expenditure forecast to $125 billion, up from $118 billion. CFO Brian Olsavsky said that number will likely increase in 2026.

Google, Meta, and Microsoft also lifted capex guidance this week, but all came in below Amazon's spending levels.

This massive investment addresses concerns that Amazon was missing out on lucrative AI deals. The company is betting heavily that AI demand will justify the spend.

The Q4 Outlook

Amazon guided Q4 revenue between $206 billion and $213 billion.

The midpoint of $209.5 billion tops the $208 billion estimate. That suggests momentum continues into the holiday quarter.

Strong Q4 guidance is critical for Amazon since it generates huge revenue during the holiday shopping season.

The Layoff Context

While investors cheered the results, it's been a rough week for Amazon employees.

The company announced Tuesday it will lay off 14,000 corporate workers as part of efforts to make the organization leaner and less bureaucratic. More cuts are expected soon.

CEO Andy Jassy said the layoffs aren't "financially driven" or due to AI "right now, at least." Instead, he blamed organizational bloat.

"If you grow as fast as we did for several years, you end up with a lot more people than what you had before, and you end up with a lot more layers," Jassy said.

Amazon finished Q3 with about 1.58 million employees, up 2% from a year ago. The company is trimming corporate roles while still growing its overall workforce.

Why the Stock Lagged

Amazon shares were up just 1.6% for the year heading into earnings, well behind megacap peers.

Investors worried AWS was losing the AI race and that Amazon's retail business faced margin pressure. The strong Q3 results addressed both concerns.

AWS proved it's still the cloud leader generating massive profits. The advertising business showed strong growth. And the increased capex spending signals Amazon is investing aggressively in AI infrastructure.

The Bottom Line

Amazon delivered exactly what Wall Street needed to see - strong results across all major businesses and commitment to AI spending.

The 12% stock pop reflects relief that AWS remains dominant despite fierce competition from Google and Microsoft. Yes, competitors are growing faster percentage-wise, but Amazon's scale means it's adding more absolute revenue and profit.

The $125 billion capex forecast for 2025, likely increasing in 2026, shows Amazon is all-in on AI infrastructure. That spending addresses concerns the company was falling behind in securing AI deals.

AWS generating two-thirds of operating profit highlights how critical the cloud business is to Amazon's overall profitability. The 20% growth and strong margins prove the business model works even as competition intensifies.

The advertising business growing 24% shows Amazon is successfully building a third major profit center beyond retail and cloud. That diversification makes the company more resilient.

The layoffs create an awkward contrast - cutting 14,000 jobs while reporting strong earnings and raising spending guidance. But investors clearly care more about financial results than workforce reductions.

For Amazon shareholders who've watched the stock lag all year, these results validate patience. The company is executing across multiple businesses while investing heavily in future growth through AI infrastructure.

The strong Q4 guidance removes concern about holiday season weakness. Amazon enters its most important quarter with momentum across retail, cloud, and advertising.