$Amazon(AMZN.US)Context: Amazon ran a more profitable business last quarter than Wall Street expected, though earnings p…

$Amazon(AMZN.US)

Context: Amazon ran a more profitable business last quarter than Wall Street expected, though earnings per share still fell short. The difference between the two results traces back to one line on the income statement: interest. The company’s operating profit beat forecasts by about $1.8 billion. Even so, EPS landed at $1.89, below the $1.96 analysts had penciled in. A 7-cent miss in a quarter where the core business outperformed calls for a closer look below the operating line. Amazon paid $1.69 billion in interest during the third quarter, according to its earnings release. A year earlier, the figure was $538 million. Interest income also rose modestly to $1.19 billion from $1.1 billion. The match suggests the business itself held up. Amazon generated more operating profit than forecast, then sent a larger slice of it to lenders before anything reached shareholders. Interest sits below operating income on the income statement, so a beat at the operating line can vanish by the time results reach the bottom line. Long-term debt climbed from $65.6 billion in December to $173.1 billion at the end of September, per the same release. Debt more than doubled in nine months. Much of the money is going toward AI data centers, which Amazon views as essential to meeting demand at AWS.

My Trade: Previously sold off my Amazon shares as I wanted to lock in the profits first after waiting for a year of slow stagnant growth. Now I'm looking at a re-entry below $220.

Takeaway: Amazon has tried to cap the near-term buildup. In July, the company said it would not borrow again in 2026. The pledge accompanied a large bond sale tied to AI spending. However, this could also mean that a bigger budget for 2027 would be on the cards. @Captain's Treasure