The earnings season continues, and yesterday we had two more giants reporting results: Amazon and Intel.
Both companies had plenty to show. One saw its cloud business growing at its fastest pace in almost five years. The other comfortably beat earnings expectations. And yet, both stocks plunged in after-hours trading.
How is that possible? It happens. And the answer tells us a lot about how the market is thinking right now.
AMAZON AND ITS ACCELERATING CLOUD BUSINESS
Let's start with Amazon. Total revenue reached $201.9 billion, up 12%. Analysts had expected $202.3 billion. A very slight miss. The same was true for earnings per share, which came in at $1.89, seven cents below expectations.
Sales in North America and international markets also came in slightly below expectations, as did the online store ($68.5 billion versus $69.1 billion). Only subscription revenue managed to beat estimates.
However, there is one major exception: AWS, Amazon's cloud business.
Revenue reached $46 billion, up 39% and above expectations. And look at the trend. Growth was 28% in the first quarter, 37% in the second, and now 39%. In other words, it isn't just growing. It's accelerating.
Operating income reached $17.8 billion, up 55%. AWS now accounts for almost 23% of Amazon's total business, a record high.
Thanks to AWS, Amazon's total operating income reached $28.1 billion. The market had expected $26.1 billion, while the company itself had previously guided for a range of $22.5 billion to $26.5 billion.
What comes next?
For the fourth quarter, Amazon expects revenue of $240 billion to $247 billion, slightly below the $244.2 billion analysts are forecasting. Operating income is expected to reach $28.5 billion to $33.5 billion.
Advertising, which was affected this year by the timing shift of Prime Day, is expected to grow somewhere between 15% and 20%.
CEO Andy Jassy also set the bar high. He expects AWS to grow by more than 40% in both 2027 and 2028. He even pointed out that no business has ever generated $1 trillion in annual revenue.
And Amazon could have two such businesses within the next 5 to 10 years.
So, what happened to the stock?
It fell by as much as 8.7% in after-hours trading, following a 4.2% decline during the regular session.
Why?
Because there is another side to the story. Amazon continues to expect capital expenditures of approximately $220 billion in 2026.
And its trailing twelve-month free cash flow turned negative, with an outflow of $42.4 billion.
As Seeking Alpha analyst Justin Purohit pointed out, the big question is whether all that money will generate meaningful returns.
INTEL AND THE FORECAST THAT SCARED INVESTORS
Now let's move on to Intel.
The company delivered a strong quarter. Earnings per share came in at $0.52, compared with market expectations of approximately $0.40.
Revenue reached $16.51 billion, up 21% and essentially in line with estimates. The operating margin also came in at 19.6%, compared with the expected 16.5%.
What made the difference?
Data centers and AI.
Revenue from this segment surged 78%, reaching $7.3 billion. According to CFO David Zinsner, this was the strongest growth in 15 years.
The foundry business, which manufactures chips for third-party customers, also grew by 58%.
On the other hand, there are PCs. Revenue from PC-related sales fell 5% to $8.1 billion, missing expectations.
Why? Global PC shipments declined 4% in the second quarter due to rising memory and component costs.
And this is where the forecasts come in.
For the fourth quarter, Intel expects revenue of $15 billion to $16 billion, while the market had been expecting approximately $17 billion.
Earnings per share are forecast at $0.25, compared with expectations of $0.43.
The company also expects a gross margin of 38%, versus the market's 42.8%.
Zinsner was clear: the slowdown in the PC market is expected to continue at least through the first half of next year.
CEO Lip-Bu Tan, meanwhile, spoke of "exceptional demand" for Xeon processors. He said the immediate priority is to increase production to meet that demand.
And the stock?
It plunged by as much as 17.5% in after-hours trading.
Seeking Alpha analyst Bill Maurer described the results as a "major step backward" in the company's recovery efforts.
Let's also put things into perspective. Intel is still up approximately 150% since the beginning of the year. However, it has lost around 23% in October alone, as concerns grow over the scale of AI-related investment.
WHAT DO THESE TWO GIANTS HAVE IN COMMON?
Put the two companies side by side and the same picture emerges.
Everything related to AI is booming.
AWS grew 39%. Intel's data center business surged 78%.
At the same time, their more traditional businesses are struggling. Amazon's online store came in below expectations, while Intel's PC business declined.
So why did their stocks fall if AI is doing so well?
Because the market isn't looking at the quarter that just ended. It's looking at what's coming next.
For Intel, investors were alarmed by the weak forward guidance.
For Amazon, the concerns were the $220 billion in planned investments and the cash that continues to flow out of the business.
Both companies are spending enormous amounts of money to expand their capacity. And the market wants to see proof that all this spending will eventually pay off.
In other words:
Good news for today. Big questions about tomorrow.