Amazon Stocks Decline 2% Despite AWS Growth; Infrastructure Outruns Cash Generation

This article first appeared on GuruFocus.

Amazon (NASDAQ:AMZN), the retail and cloud computing giant, is bringing in more cloud revenuebut spending even faster to build capacity. Shares declined 1.98% to $238.97 at 11:05 a.m. ET on October 30 as investors weighed the infrastructure bill against accelerating AWS demand. The earnings reaction puts one question front and center: how soon can that spending turn into enough cash to cover the bill?

Amazon’s third-quarter results showed trailing operating cash flow of $168.3 billion against $210.7 billion in net property-and-equipment purchasesa $42.4 billion shortfall. Operations covered roughly 80% of that investment. AWS delivered $46.0 billion in quarterly revenue and $17.8 billion in operating income, implying an operating margin of about 38.7%. The cloud engine is highly profitable. The challenge is getting cash generation to catch up with construction.

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