Amazon Reports Deceleration in Advertising Revenue Growth
In its third-quarter report, Amazon disclosed a notable deceleration in advertising revenue growth. This downturn was attributed to the strategic decision to host Prime Day in the second quarter for most major countries, coupled with adverse foreign exchange rate fluctuations, ultimately leading to an earnings report that fell short of Wall Street projections.
Over the previous four quarters, Amazon’s advertising segment had been experiencing robust growth, averaging around 22% year-on-year.
This figure saw an increase to 26% during the second quarter of 2026. However, in Q3, the company reported a marked decline, with advertising revenue growth slowing to 11%.
The company anticipates a rebound, projecting a rise in advertising growth to the “high teens” for the fourth quarter.
In financial metrics, Amazon reported net sales amounting to $201.9 billion and a diluted earnings per share (EPS) of $1.89.
In contrast, analysts had forecasted revenue of $202.31 billion accompanied by an EPS of $1.96, according to consensus forecasts compiled by LSEG.
Following the announcement, Amazon’s stock experienced a decline of 4% in after-hours trading. For the upcoming fourth quarter, the company forecasts revenue growth of between 12% and 16%, estimating figures to range between $240 billion and $247 billion.
Regionally, North American revenue increased by 6% to reach $112.9 billion, while international revenue rose by 5% to $43.1 billion.
Furthermore, Amazon Web Services (AWS) posted an impressive 39% revenue growth, culminating in $46 billion, marking the sector’s fastest growth in almost five years, and significantly surpassing its 20% growth reported in the third quarter of 2025.
Amazon’s President and CEO, Andy Jassy, noted in prepared remarks, “Our AWS investments in functionality and infrastructure are yielding results, with over 39% year-on-year growth in Q3, which reflects a revenue run rate of $184 billion.
We anticipate revenue growth rates exceeding 40% in both 2027 and 2028.” He emphasized that the improved product selection and expedited delivery are bolstering their market share in retail, alongside positive developments in emerging business sectors, from Grocery and Pharmacy to ventures like Amazon Leo and Zoox.
“There has never been a trillion-dollar revenue business before, and we may witness the emergence of two such entities within the next five to ten years.”
Throughout the earnings call on Thursday, Jassy maintained an optimistic outlook regarding the future of AWS.
He repeatedly highlighted its revenue run rate and growth potential, asserting that these factors would drive user adoption of artificial intelligence (AI), which he described as “the most monumental transformation of our era.”
“The increasing integration of AI across various domains is significantly enhancing core capabilities, such as reinforcement learning and tool utilization,” he remarked, while emphasizing the advancements brought about by their Graviton processors.
He added, Though the volume of capacity we add each quarter may fluctuate, projecting consistent growth exceeding 40% year-over-year for both 2027 and 2028 is indeed remarkable.
The potential for this division to evolve into a trillion-dollar revenue business in the next five to ten years presents a unique and exhilarating opportunity that we are eagerly pursuing.
Source link: Variety.com.
