Key points
- Amazon misses earnings and revenue estimates
- Amazon's AWS revenue grows 39%, beating forecasts
- Amazon's property spending exceeds operating cash by $33.5 billion
Amazon (AMZN) missed Wall Street's third-quarter earnings and revenue estimates on Oct. 29, despite the fastest growth at its AWS cloud business in nearly five years.
Earnings were $1.89 a share, below the $1.96 analysts expected. Revenue came to $201.9 billion, short of the $202.31 billion forecast, according to LSEG data cited by Reuters.
Amazon shares fell 7% to $226.85 in after-hours trading as of 8:01 p.m. ET, after closing the regular session down 4.2% at $243.79.
Amazon Web Services revenue rose 39% to $46.0 billion, ahead of the $45.61 billion analysts expected. The company said it was AWS's fastest growth in nearly five years, according to its earnings release.
For the fourth quarter, Amazon forecast revenue of $240 billion to $247 billion. The midpoint, $243.5 billion, is below the $244.51 billion analysts expected. Amazon projected operating income of $28.5 billion to $33.5 billion, compared with $25.0 billion a year earlier.
| Metric | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Net sales | $201.9 billion | $180.2 billion | +12% |
| AWS sales | $46.0 billion | $33.0 billion | +39% |
| Advertising sales | $19.6 billion | $17.7 billion | +11% |
| Operating income | $28.1 billion | $17.4 billion | +61% |
| Net income | $20.7 billion | $21.2 billion | -2% |
| Earnings per share | $1.89 | $1.95 | -3% |
Source: Amazon third-quarter 2026 earnings release, Oct. 29, 2026.
Why did Amazon's profit fall from a year ago?
Net income fell to $20.7 billion from $21.2 billion. Amazon said the drop came mainly from $9.5 billion in pretax gains on its investments in Anthropic, which were included in last year's third quarter. Amazon and Google lead Anthropic's group of strategic investors, as we laid out in our look at Anthropic's ownership.
Operating income, which leaves out gains like those, rose 61% to $28.1 billion. Amazon said its operating margin of 13.9% was the highest in its history.
Timing also held back sales growth. Amazon moved Prime Day into the second quarter in most large countries this year, after holding it entirely in the third quarter in 2025. Without that shift, the company said, third-quarter sales growth would have been about 4 percentage points higher.
How much is Amazon spending on its AI buildout?
Amazon spent $75.9 billion on property and equipment in the third quarter, after subtracting proceeds from sales and incentives. That's up from $34.2 billion a year earlier, by our calculation from the cash flow statement in the release. Chief Financial Officer Brian Olsavsky said on the call that the spending "primarily relates to AWS and AI."
Amazon's operations generated $42.4 billion in cash during the quarter. That left the company $33.5 billion short of covering its spending, which is what negative free cash flow means. Over the past 12 months, free cash flow was negative $42.4 billion, compared with positive $14.8 billion a year earlier.
Amazon had already spent more than its operations generated in the April-to-June quarter. I found that when I lined up the big AI spenders' cash flow statements in our capital spending scoreboard on Oct. 25.
"The free cash flow looks like the ugly part of the report," Dave Wagner, a portfolio manager at Aptus Capital Advisors, told Reuters.
Amazon kept its forecast for about $220 billion in cash capital spending in 2026. Chief Executive Andy Jassy said on the call that Amazon expects "to spend meaningfully more in 2027," according to a call transcript published by Benzinga. "We can fund this," he said.
What did Amazon say about demand for AWS?
Jassy said AWS's backlog reached $578 billion, more than double a year earlier. In its last quarterly report, Amazon described this backlog as commitments in customer contracts, mostly for AWS, for future services it expects to provide but has not yet recognized as revenue. For contracts longer than one year, those commitments were about $496 billion as of June 30, according to that filing.
AWS earned $17.8 billion in operating income, for an operating margin of 38.7%. In the release, Jassy said Amazon projects AWS "revenue growth rates of over 40% both in 2027 and in 2028."
Jassy also said Amazon plans to start selling its Trainium AI chips to customers outside AWS late in 2027.
What happened to advertising sales?
Advertising revenue rose 11% to $19.6 billion, or 12% excluding currency changes. Analysts had expected 18% growth, Reuters reported. Amazon blamed timing, mainly the Prime Day shift, and said it expects ad growth in the high teens in the fourth quarter.
Where does Amazon stock stand this year?
Amazon ended 2025 at $230.82. The shares were up 5.6% for the year at Thursday's close of $243.79. At $226.85 after hours, they were down about 1.7% for the year.
Alphabet and Microsoft reported their own third-quarter results a day earlier, and we compared their spending and cash flow in this Oct. 28 piece.
