Introduction
Yes, it's confusing. You wake up, see that Amazon beat earnings expectations, and then... the stock drops 5%. What just happened?
Here's the simple answer: Amazon's stock often drops after "good" earnings not because of the past (what they already earned), but because of the future (what they say is coming next).
As financial explainers, we've seen this pattern for years across tech stocks. Investors don't just look at the headline number in the press release. They dig deeper into three hidden clues that most casual investors miss:
- Guidance (the company's forecast for next quarter)
- AWS growth rate (the hidden profit driver)
- Whisper numbers (the secret expectations Wall Street won't tell you about)
In this article, we'll break down exactly why "good earnings" sometimes mean "bad stock price" — and what to look for so you're not caught off guard.
What is 'Guidance' and Why Does it Matter More Than EPS?
The Simple Explanation
When Amazon reports earnings, they share two things:
- What happened last quarter (revenue, profit, EPS)
- What they expect next quarter (this is called "guidance")
Here's the key: Stock prices are based on the future, not the past.
If Amazon says, "We made $150 billion last quarter (great!), but we expect only $140 billion next quarter (uh-oh)," the stock can drop — even though the past quarter was excellent.
Real Example
Let's say Amazon reports:
| Metric | Wall Street Expected | Amazon Reported | Result |
|---|---|---|---|
| Q3 Revenue | $141B | $143B | ✅ Beat by $2B |
| Q3 EPS | $0.50 | $0.60 | ✅ Beat by 20% |
| Q4 Guidance (Revenue) | $155B | $148B | ❌ Miss by $7B |
| Stock Reaction | — | — | 📉 Down 6% |
See the problem? The past was great, but the future forecast disappointed.
Why This Happens
- Slowing growth: Maybe holiday sales aren't as strong as expected.
- Higher costs: AWS infrastructure spending is eating into profits.
- Economic concerns: Amazon might be bracing for a recession.
Bottom line: When you see "Amazon beats earnings but stock falls," immediately check the guidance.
Did AWS Growth Slow Down? (The 'Hidden' Number)
Why AWS is the Most Important Number
Amazon has two main businesses:
- E-commerce (sells stuff online) — Makes a lot of revenue, but low profit margins (~3-5%)
- AWS (Amazon Web Services) (cloud computing) — Makes less revenue, but huge profit margins (~30%)
Translation: AWS is only about 15% of Amazon's revenue, but it's roughly 60-70% of operating profit.
If AWS growth slows down, investors panic — even if total revenue looks fine.
What to Look For
When reading the earnings report, find this table (usually in the "Segment Results" section):
| Segment | Q3 2023 Revenue | Q3 2024 Revenue | YoY Growth |
|---|---|---|---|
| North America | $87B | $95B | +9% |
| International | $32B | $35B | +9% |
| AWS | $23B | $27B | +17% ✅ |
Good sign: AWS growing 15%+
Warning sign: AWS growing under 10% (means competition from Google Cloud or Microsoft Azure)
Recent Example
In Q1 2023, AWS growth slowed to 11% (from 20%+ in previous quarters). Amazon stock dropped 8% after-hours, even though overall revenue beat expectations.
Why? Investors worried that cloud computing demand was weakening.
What is 'Whisper Number' vs. 'Analyst Estimates'?
The Difference
Most people think Amazon just needs to "beat analyst estimates" to make the stock go up. But there's a secret second number called the "whisper number."
| Term | What It Means | Example |
|---|---|---|
| Analyst Estimate | Official forecast from Wall Street analysts (public) | EPS: $0.50 |
| Whisper Number | Unofficial expectation from big investors (not public) | EPS: $0.65 |
Here's the trap: If Amazon reports EPS of 0.60,they"beat"theofficialestimate(0.60,they"beat"theofficialestimate(0.50), but they "missed" the whisper number ($0.65).
Result? The stock can still drop.
Where Do Whisper Numbers Come From?
They come from:
- Hedge fund research
- Private investor surveys
- Trading desk rumors
You won't find them in press releases. Sites like Earnings Whispers or Bloomberg sometimes report them, but they're not always accurate.
What This Means for You
If you see Amazon beat earnings but the stock still drops, it's often because of the whisper number.
Pro tip: Watch the stock price movement during the earnings call (not just the initial after-hours reaction). If the CEO says something reassuring about AWS or guidance, the stock can recover quickly.
Quick Reference: Earnings Jargon Explained
| Term | What It Means | Why It Matters |
|---|---|---|
| EPS (Earnings Per Share) | Profit divided by number of shares | Shows if the company is making more money per share |
| Revenue | Total sales (before expenses) | Shows if the business is growing |
| Guidance | Company's forecast for next quarter | Tells you if growth will continue |
| EPS Beat | Actual EPS is higher than estimates | Usually good for stock price |
| YoY (Year-over-Year) | Comparing this year to last year | Shows growth trend |
| Operating Income | Profit from main business (before taxes) | Shows real profitability (not just revenue) |
Frequently Asked Questions (FAQ)
Why do stocks drop after hours?
After-hours trading happens from 4:00 PM to 8:00 PM ET (after the market closes). This is when earnings reports are usually released.
Stocks can be more volatile after-hours because:
- Fewer buyers and sellers (lower volume)
- Big institutional investors react first
- News spreads quickly
The after-hours price isn't final — the stock can recover (or drop more) when the market opens the next day.
What is a 'whisper number'?
A whisper number is an unofficial earnings expectation that circulates among professional investors. It's usually higher than the official analyst estimate.
If Amazon beats the official estimate but misses the whisper number, the stock can still fall.
Example:
- Official estimate: $0.50 EPS
- Whisper number: $0.65 EPS
- Amazon reports: $0.60 EPS
- Result: Beat the estimate, but stock drops (because of whisper miss)
When is the next AMZN earnings call?
Amazon reports earnings four times per year (quarterly):
- Q1: Late April
- Q2: Late July
- Q3: Late October
- Q4: Late January/Early February
You can find the exact date on Amazon's Investor Relations page: ir.aboutamazon.com
Final Takeaway
When Amazon stock drops after "good" earnings, it's almost never random. Here's your checklist:
✅ Check the guidance → Is next quarter's forecast lower than expected?
✅ Check AWS growth → Is it slowing down below 12-15%?
✅ Check for whisper numbers → Did Amazon beat the official estimate but miss the secret expectation?
Understanding these three factors will help you make sense of confusing stock reactions — and maybe even spot buying opportunities when others panic.