Amazon Q3 2026: AWS grows 39% as cash flow turns negative

Amazon reported third-quarter 2026 results on October 29, and its cloud unit carried the quarter. AWS sales rose 39% to $46.0 billion, according to Amazon's results release filed with the SEC. But earnings per share missed forecasts, and the cost of building AI data centers pushed free cash flow deep below zero.

Net sales grew 12% to $201.9 billion. Operating income jumped to $28.1 billion from $17.4 billion a year earlier. Net income slipped to $20.7 billion from $21.2 billion, and diluted earnings per share fell to $1.89 from $1.95.

How the quarter compared with forecasts

Wall Street wanted a little more. Analysts expected $202.2 billion in revenue and $1.97 per share, the Motley Fool reported. Amazon came in just under on both.

AWS did beat. The LSEG consensus for the cloud unit was $45.61 billion, or 38.2% growth, according to The Elec. AWS also sped up from 37% growth in the second quarter.

Advertising went the other way. Ad revenue rose 12% to $19.6 billion, The Elec reports, against an expected 18%. In the second quarter, ad sales had grown 26%.

Metric	Q3 2026	Versus Q3 2025
Net sales	$201.9B	up 12%
Operating income	$28.1B	from $17.4B
Net income	$20.7B	from $21.2B
Diluted EPS	$1.89	from $1.95
AWS sales	$46.0B	up 39%
AWS operating income	$17.8B	not reported

Where the money went

The bigger worry was cash. Free cash flow is the cash a company has left after paying for buildings and equipment. Over the twelve months to September 30, Amazon's free cash flow was minus $42.4 billion, the filing shows. A year earlier it was positive $14.8 billion, The Elec notes.

The third quarter alone burned through $33.5 billion of free cash flow. Amazon spent $77.3 billion on property and equipment in those three months, according to The Elec. The company puts its cash capital spending for all of 2026 at about $220 billion.

The shares had already fallen before the report. They closed at $243.79 on October 29, down 4.25%, and fell further after hours, the Motley Fool said.

The retail side

Amazon's store business grew slowly. North America sales rose 6% to $112.9 billion, with $8.7 billion of operating income. International sales rose 5% to $43.1 billion, with operating income of $1.6 billion.

That means AWS earned $17.8 billion of operating income on $46.0 billion of sales. The two retail segments earned $10.3 billion on more than three times the revenue.

The outlook

For the fourth quarter, Amazon expects net sales of $240 billion to $247 billion, up 12% to 16%. It guided operating income to $28.5 billion to $33.5 billion, against $25.0 billion a year ago. The analyst average for revenue was $244.51 billion, so the midpoint sits slightly below it.

Management also projected AWS growth above 40% in 2027 and 2028, according to the Motley Fool. The same report says Amazon signed new AI agreements with Meta and Salesforce.

The pattern matches the rest of big tech this week. Alphabet fell 11% after AI spending pushed its cash flow negative again, 24/7 Wall St. reported. Microsoft and Alphabet posted their own cloud numbers a day earlier, with Azure up 48% and Google Cloud up 103%.

What this means for developers

• AWS is where the spending shows up. AWS is the unit growing fast enough to justify a capital budget of about $220 billion. Teams waiting on scarce AI instances should ask their account managers what comes online in 2027, and get it in writing.
• Growth at 39% does not mean cheaper prices. AWS earned more operating income than all of Amazon's retail combined. There is no sign in the results of a price war, so budget cloud costs at today's rates.
• Compare clouds on growth, not just price. Azure and Google Cloud grew faster than AWS this quarter. If you run on more than one cloud, check which provider is adding capacity in the regions you use.
• Watch the ad numbers if you sell on Amazon. Ad growth fell to 12% from 26% a quarter earlier. Sellers who buy sponsored listings may see that show up in auction prices.
• Expect pressure to show returns. Investors sold the stock on a cash burn of $33.5 billion in one quarter. Amazon will be pushed to turn AI capacity into paid usage fast, so watch for new bundled AI services on AWS.