Amazon (NASDAQ: AMZN) is set to release its third-quarter earnings report on October 29, 2026, and investors are closely watching for clues about the company's performance. The e-commerce and cloud giant has seen steady growth from its stable e-commerce business and AI-driven initiatives. However, its $220 billion capital expenditures (capex) budget for this year has raised concerns about financial strain.
Historically, Amazon's stock has reacted positively to third-quarter earnings reports, with significant gains following the announcements. This pattern suggests that buying the stock before the report could be advantageous. However, a missed earnings target in the fourth quarter of last year led to a decline, highlighting the risks involved.
Beyond seasonal trends, Amazon's e-commerce business remains resilient, even in a recession. While the retail segment operates on low margins, it has driven growth through digital advertising, subscriptions, and third-party seller services. The focus, however, is on Amazon Web Services (AWS), the AI-driven cloud arm that accounted for the majority of the company's operating income despite making up just 21% of its Q2 revenue. AWS revenue grew by 37% annually in the latest quarter, up from 17.5% yearly in the year-ago quarter.
Valuation also plays a role in the current outlook. A $53.4 billion pre-tax gain on Amazon's Anthropic investment inflated Q2 net income, pushing the trailing P/E down to 20. The forward P/E of 31 is considered low compared to past years when Amazon routinely traded above 50 times earnings. This valuation, combined with historical performance, increases the likelihood of a favorable reaction to the earnings report.