Nasdaq falls 2.5% Friday morning as Amazon drops 4.4% after results
Key Facts
The Nasdaq Composite fell 2.5% at 9:35 a.m. Eastern time on Friday, October 30, after losing 1.4% in the previous session, as pressure on technology stocks extended following Amazon's results. The company's shares fell 4.4% in morning trading, making them one of the market's biggest drags, according to The Associated Press. The S&P 500 was down 1.3% at the same time and was on track to erase its gains for October. The Nasdaq ended Thursday's session down 365.13 points at 26,184.72. The Associated Press attributed a major part of Thursday's losses to a decline in Alphabet after results came in weaker than expected, putting the market's drop in a broader context than Amazon's announcement alone.
Amazon's decline followed its third-quarter results, with the stock falling 7% in after-hours trading before ending the regular session on October 29 down 4.3% at $243.79. Reuters linked investors' reaction to cautious sales expectations, concerns about free cash flow and elevated capital spending. This came alongside strong growth in cloud computing, but AWS's strength did not dispel concerns about the scale of investment needed to support artificial intelligence. Chief Executive Andy Jassy told investors on Thursday's call that the company expects to spend $220 billion on capital expenditures during the year, The Associated Press reported. Most of that spending, according to the news agency, was going toward building data centers for AI.
AWS sales rose 39.3% to $46 billion in the quarter ended September 30, compared with growth of 37% in the previous quarter, according to The Associated Press. The company described this as its fastest growth in nearly five years. The figures highlighted accelerating cloud activity as investors focused on whether that growth would keep pace with the cost of expansion. The $220 billion capital-spending forecast put AWS's performance within a broader debate over returns on investment in AI infrastructure. Cloud growth alone was therefore not enough to contain the decline that followed the results.
Amazon's advertising sales revenue rose 12% to $19.6 billion in the third quarter, below analysts' estimates for growth of 18%, Reuters reported. It was the unit's first miss against analysts' estimates in seven quarters. Growth was slower than the 26% increase in the second quarter and 22% growth in the third quarter of the previous year. The comparison pointed to a marked slowdown in a segment that had posted a faster pace in the comparable periods. Investors were thus confronted with a mixed picture: accelerating growth at AWS alongside weaker-than-expected advertising performance and concerns about cash flow and spending.
For its fourth-quarter guidance, Amazon forecast sales of between $240.0 billion and $247.0 billion, a range that brackets analysts' estimate of $244.51 billion, according to Reuters, citing LSEG. But the midpoint, at $243.5 billion, was slightly below that estimate. The guidance kept investors focused on the holiday season, as the range included a figure below the average analyst forecast. This followed the third-quarter advertising sales miss. The results added to market concerns about pressure on technology stocks, reflected in the Nasdaq's declines on Thursday and Friday.
In the U.S. economy, the Bureau of Economic Analysis's advance estimate showed real gross domestic product grew at an annual rate of 3.4% in the third quarter, after growth of 2.2% in the second quarter. The bureau said investment, consumer spending and government spending contributed to the increase, while a decline in exports partly offset those factors. The estimate was released on October 29, alongside the stock-market decline, but the bureau's data did not link growth to market movements. The second estimate of third-quarter GDP and corporate profits is scheduled for November 25, 2026, at 8:30 a.m. Eastern time. That will be the next update to the economic reading released in late October.