October 31, 2026 – The cloud unit grew at its fastest pace in nearly five years, and margins hit a record. Yet a historic spending spree on AI data centers has flipped free cash flow deeply negative.
In Summary
Amazon’s third-quarter sales rose 12% to $201.9 billion, and operating income jumped to $28.1 billion.
AWS sales grew 39% to $46.0 billion, its fastest growth in nearly five years.
Capital spending hit $77.3 billion in the quarter, more than double a year earlier.
Trailing free cash flow swung to an outflow of $42.4 billion, from an inflow of $14.8 billion.
Amazon Q3 results showed a business firing on profit and spending at a record pace. Net sales rose 12% to $201.9 billion, the company reported on October 29. Operating income jumped to $28.1 billion from $17.4 billion, for a record 13.9% margin.
The cloud was the star. AWS sales rose 39% to $46.0 billion, its fastest growth in nearly five years. That puts the unit on a $184 billion annual run rate. Excluding currency moves, total sales grew 13%. Prime Day also moved into the second quarter this year. Without that shift, Amazon Q3 growth would have been about four points higher.
Amazon Q3 profit leans on AWS
AWS also drove most of the profit. Its operating income rose to $17.8 billion from $11.4 billion. In other words, AWS made up 23% of sales but 63% of operating income. North America retail earned $8.7 billion, up from $4.8 billion. International added $1.6 billion.
Net income slipped to $20.7 billion from $21.2 billion. However, that dip reflects a one-off. A year earlier, Amazon booked $9.5 billion of pre-tax gains on its Anthropic stake.
AI spending flips free cash flow negative
The cost of this growth is now plain. Amazon spent $77.3 billion on property and equipment in the third quarter, up from $35.1 billion a year earlier. The company said the year-over-year increase mainly reflects investment in AI. That single quarter’s outlay is more than triple what Amazon spent in the first quarter of 2025.
As a result, free cash flow over the past 12 months swung to an outflow of $42.4 billion. A year ago, it was an inflow of $14.8 billion. Operating cash flow still rose 29% to $168.3 billion, but spending rose faster.
Amazon expects about $220 billion of cash capital spending in 2026. Through September, it had already spent $175.7 billion, its quarterly filing shows.
Robots and agents in the mix
Amazon is also leaning on automation in its warehouses. It deployed its one millionth robot in July 2025, across more than 300 facilities. The third-quarter release did not give an updated robot count.
Meanwhile, demand for AI agents is rising on the software side. Tens of thousands of customers now use Bedrock AgentCore. In the third quarter, they deployed twice as many agents as in the previous three quarters combined. Moreover, spending on Bedrock by the largest US companies rose nearly sevenfold from a year earlier.
What investors are weighing
Still, the stock tells a cautious story after the Amazon Q3 report. Shares fell 4.2% on Thursday and another 1.4% on Friday, to $240.35, Nasdaq data show. Investors are weighing record margins against record spending, and the timing of any payoff.
For the fourth quarter, Amazon guided sales of $240 billion to $247 billion. It expects operating income of $28.5 billion to $33.5 billion. Jassy also projected AWS growth above 40% in both 2027 and 2028. If that holds, today’s spending may look cheap. Otherwise, the cash drain will draw more scrutiny.
