Guotai Haitong: Amazon.com, Inc. (AMZN.US) Q3 capital expenditure exceeds expectations, increasing cash flow pressure.

Guotai Haitong released a research report stating that Amazon.com, Inc. (AMZN.US) 26Q3 AWS business continued high growth, AI computing power demand remained strong, but retail and advertising business growth slowed somewhat, capital expenditure continued to expand, and free cash flow came under pressure. Looking ahead, AI demand is expected to continue supporting cloud business growth, but attention still needs to be paid to the return on capital expenditure and supply-demand changes in the upstream computing power industry chain. Guotai Haitong's main views are as follows: Amazon.com, Inc. has strong computing power demand, active AI investment, and expanding cash flow pressure. In 26Q3, Amazon.com, Inc.'s overall performance was slightly below expectations. Cloud business growth was good, order reserves were sufficient with high visibility, the company's statements on AI investment were positive, the 2026 guidance remained unchanged, and high-speed growth is expected in 2027. However, quarterly capital expenditure in 2026 fluctuated significantly, and attention needs to be paid to the risk of a front-loaded then back-loaded supply chain in Q3 and Q4. Looking ahead to 2027, cash flow pressure will further intensify, and the company is expected to further expand financing scale, requiring close attention to the macroeconomic interest rate environment and capital expenditure returns. Amazon.com, Inc. 26Q3 revenue growth slowed, and net profit performance was lackluster. In 26Q3, the company achieved revenue of US$201.9 billion, up 12% year on year, and diluted EPS of US$1.89, both slightly below market expectations. Among them, online store revenue grew about 2% year on year, and advertising revenue was US$19.6 billion, up 11% year on year. Affected by the adjustment to the timing of Prime Day, this year's event was moved forward from Q3 last year to Q2. Excluding this factor, the company's Q3 revenue year-on-year growth rate would have been about 4 percentage points higher. Operating profit for the quarter reached US$28.1 billion, with an operating margin of 13.9%; the year-on-year decline in net profit was mainly affected by a one-off gain related to the Anthropic investment in the same period last year, and there is a certain difference between the main business operating performance and net profit growth. The company provided Q4 revenue and operating profit guidance, expecting revenue of US$240 billionUS$247 billion and operating profit of US$28.5 billionUS$33.5 billion, with the midpoints of both ranges slightly below market consensus. AWS cloud business continued to grow, with high visibility of medium- to long-term demand. In 26Q3, AWS achieved revenue of US$46 billion, up 39.3% year on year. AWS Backlog reached US$578 billion, up more than 100% year on year, reflecting that cloud service demand and order reserves remain strong and medium- to long-term visibility continues to improve. Management expects AWS revenue growth to exceed 40% in both 2027 and 2028, and stated that newly added computing power can basically be absorbed by customers in a timely manner. Capital expenditure continued to expand, and free cash flow came under pressure. Cash capital expenditure in 26Q3 was about US$77.3 billion, higher than the Bloomberg consensus estimate of US$58.8 billion, while the company maintained its 2026 capital expenditure guidance of about US$220 billion unchanged, with spending in Q3 and Q4 likely to show a front-loaded then back-loaded pace; the company also expects capex to grow significantly further in 2027. Free cash flow in 26Q3 was -US$33.5 billion, and with main business growth slightly below expectations, cash flow pressure continued to increase. Risk warnings: AI demand and commercialization progress falling short of expectations, risk of intensified industry competition, supply chain risk, data center construction and delivery progress falling short of expectations, financing risk.