Amazon reported 39% year-over-year growth at Amazon Web Services (AWS) in its October 29, 2026, earnings announcement, while free cash flow for the 12 months ended September 30 fell to negative $42.357 billion. The company generated more cash from operations, but purchases of property and equipment grew faster. For the third quarter itself, Amazon reported net sales of $201.944 billion, up 12%, including $45.984 billion from AWS, according to its official results release.
The figures capture two different parts of Amazon’s business: rising sales and operating profitability, alongside an investment program that exceeded the cash its operations generated over the preceding year.
AWS delivered growth and a large share of operating profit
Amazon’s consolidated operating income, the profit from running its businesses before non-operating items and taxes, reached $28.076 billion in Q3. That was up from $17.422 billion a year earlier. Its operating margin was 13.9%, which Amazon described as its highest ever. In plain terms, the company earned about 14 cents of operating profit for each dollar of sales.
AWS generated $17.773 billion in operating income, with a segment operating margin of 38.7%. The cloud business therefore supplied roughly 63% of Amazon’s consolidated operating income while accounting for about 23% of sales. Those shares, calculated from Amazon’s reported figures, help explain why cloud performance carries so much weight in the results.
The other segments were profitable too. North America reported $112.852 billion in sales and $8.723 billion in operating income. International reported $43.108 billion in sales and $1.580 billion in operating income.
Currency movements reduced consolidated reported sales by $900 million relative to the year-earlier comparison. Excluding that effect, Amazon said total sales grew 13%, rather than the reported 12%.
How free cash flow reached negative $42.357 billion
The negative free-cash-flow figure covers the 12 months ended September 30, 2026. Amazon calculates this measure by subtracting purchases of property and equipment, net of sales proceeds and incentives, from operating cash flow.
Operating cash flow measures cash generated by the business’s operations. Free cash flow then accounts for the equipment and property purchases included in Amazon’s definition. Here is the exact reconciliation for the two comparable periods:
| Measure ($ billions) | 12 months ended September 30, 2026 | 12 months ended September 30, 2025 |
| Operating cash flow | 168.300 | 130.691 |
| Net purchases of property and equipment | 210.657 | 115.903 |
| Free cash flow | −42.357 | 14.788 |
The current-period calculation is $168.300 billion − $210.657 billion = −$42.357 billion. Amazon rounded that result to a $42.4 billion outflow in its announcement.
The change between the periods explains how cash generation could improve while free cash flow deteriorated. Operating cash flow increased by $37.609 billion, or approximately 29%. Net property-and-equipment purchases increased by $94.754 billion. The difference between those increases produced a $57.145 billion decline in free cash flow.
For a reader assessing Amazon’s spending capacity, that distinction matters: operations generated substantially more cash, but the investment bill increased by an even larger amount.
Amazon linked the investment increase primarily to AI
Amazon said the roughly $94.8 billion year-over-year increase in net property-and-equipment purchases was the primary driver of the free-cash-flow decline. The company said that increase primarily reflected investment in artificial intelligence.
Separately, Amazon expected approximately $220 billion in total cash capital expenditures for 2026. Capital expenditures, often shortened to capex, are spending on long-lived assets such as property and equipment. That full-calendar-year outlook and the trailing-12-month purchases in the cash-flow calculation cover different periods.
CEO Andy Jassy said Amazon’s investment in AWS functionality and infrastructure was working. He projected AWS revenue growth above 40% in both 2027 and 2028, extending management’s expectations beyond the reported quarter.
In Bloomberg Television’s October 29 discussion, Bloomberg Intelligence analyst Anurag Rana considered the capex level consistent with his expectations. His surprise was that AWS had not exceeded expectations by more. That assessment illustrates the difference between strong reported growth and an analyst’s expectations for how strong it could have been.
Why operating income rose while net income fell
Amazon’s net income fell to $20.685 billion from $21.187 billion in Q3 2025, despite the increase in operating income. Diluted earnings per share declined to $1.89 from $1.95.
The two profit measures account for different things. Operating income captures operating performance; net income also includes non-operating gains and expenses, plus taxes.
Amazon attributed the net-income decline primarily to $9.5 billion in pre-tax gains from its Anthropic investment in Q3 2025. Those gains had boosted the prior year’s non-operating income. In Q3 2026, Amazon instead recorded $1.207 billion in total non-operating expense.
That prior-year investment gain made the net-income comparison tougher even as the company earned more from its operations.
Prime Day affected the retail comparison
North American sales grew 6% year over year. International sales grew 5%, or 8% excluding currency movements. Amazon also identified a calendar effect: Prime Day took place in Q2 2026 in most large countries, whereas the event fell entirely in Q3 in 2025.
Amazon said consolidated Q3 year-over-year sales growth would have been approximately four percentage points higher without that timing shift. Moving the event changed which quarter captured its sales contribution.
Bloomberg Intelligence analyst Poonam Goyal described retail performance as soft but said that weakness was expected. In the same discussion, she connected advertising’s profitability with improving retail margins and highlighted North America’s approximately 7.7% operating margin.
Results also varied against analyst estimates. Zacks Equity Research’s comparison, carried by Yahoo Finance on October 29, put consolidated revenue of $201.94 billion below its $202.11 billion consensus and diluted earnings per share of $1.89 below its $2.01 consensus.
AWS sales of $45.98 billion exceeded the $45.42 billion average from the 10 analysts cited by Zacks. Advertising sales of $19.64 billion fell below the $20.87 billion average from its seven-analyst sample. Cloud strength and advertising weakness therefore appeared within the same earnings report.
Amazon’s Q4 2026 outlook
For the fourth quarter, Amazon forecast net sales of $240 billion to $247 billion, representing year-over-year growth of 12% to 16%. The outlook included an expected currency headwind of approximately 0.6 percentage points.
Amazon forecast operating income of $28.5 billion to $33.5 billion, compared with $25.0 billion in Q4 2025. It also expected advertising revenue growth in the high teens, excluding currency movements, following 12% growth on that basis in Q3.
