Amazon.com, Inc. (NASDAQ: AMZN) reported a stronger third quarter, with profits and sales rising primarily due to steady growth in its cloud services. The company posted earnings per share of $1.95, beating expectations by 25%, alongside a 12% increase in revenue to $180.2 billion. However, the stock price was a different story pre and post announcement.
This decline reflects investor sentiment during regular trading hours in which concerns had begun to surface over special charges such as the $2.5 billion settlement with the Federal Trade Commission and $1.8 billion in severance related to layoffs. These charges affected the expected operating income and caused some selling pressure. Additionally, broader market uncertainties in the tech sector and worries about Amazon’s competitive position in artificial intelligence also contributed to cautious investor behavior during that day’s trading session.
Following the earnings announcement, the stock price reversed sharply, climbing sharply after market, and then opening up more than 12.%. Investor confidence was restored as they focused on the core business strength highlighted by Amazon Web Services (AWS) posting 20.2% revenue growth year-over-year to $33 billion. AWS remains the profit engine, with operating income reaching $11.4 billion. Other segments, like advertising, also showed solid 22% revenue gains, supporting a broader optimistic outlook.
The pre-earnings stock drop likely reflected profit-taking and risk management before the results, apprehension about the charges, and uncertainty around growth investments. After the results, recognition of the core business strength and the one-time nature of the charges sparked the swift rebound. Technical market actions, including momentum trading and short covering, also helped fuel the price jump. Compared to peers such as Microsoft and Alphabet, Amazon’s stock displayed heightened volatility due to investor focus on AWS growth and AI investments.
Amazon plans to spend about $125 billion in capital expenditures this year, with increases expected in 2026. The investments prioritize AI development, cloud infrastructure, robotics, and fulfillment network enhancements aimed at long-term growth rather than immediate margin gains. The company’s efforts to improve logistics and inventory management illustrate a commitment to operational efficiency alongside growth.
This quarter’s results and the contrasting stock price moves highlight the complexity investors face when evaluating a large, multifaceted company. Strong operational performance can be obscured by one-time charges and market psychology, resulting in unpredictable price swings. Understanding these factors can help investors distinguish between temporary volatility and fundamental business trends.
Amazon’s performance continues to demonstrate robust revenue and profit growth, especially fueled by AWS and advertising, while navigating competitive and regulatory challenges. The stock’s decline before earnings followed by a sharp post-announcement increase reflects a market quick to reassess when full information emerges.
