Amazon Q3 earnings put two stories side by side: a faster-growing cloud business and a cash balance sheet absorbing record spending. In its third-quarter results release, Amazon reported net sales of $201.9 billion, up 12% from $180.2 billion a year earlier, while trailing 12-month free cash flow swung to an outflow of $42.4 billion.
The Amazon Q3 earnings numbers
Operating income rose to $28.1 billion from $17.4 billion, an operating margin of 13.9%. Net income, however, slipped 2% to $20.7 billion from $21.2 billion, and diluted earnings per share were $1.89 versus $1.95. Because operating income rose while net income fell, the difference sits in items below the operating line, which the release itemizes.
AWS accelerates
Amazon Web Services sales reached $46.0 billion, up 39% from $33.0 billion a year earlier. That is the segment’s biggest contribution to the quarter and the clearest sign that demand for cloud and AI capacity is still growing. Rivals reported similar strength this week: Google Cloud revenue doubled to $30.7 billion, and Azure grew 48%.
The cash side of the ledger
Trailing 12-month free cash flow was an outflow of $42.4 billion, compared with an inflow of $14.8 billion a year earlier. The reason is capital spending. Amazon bought $77.3 billion of property and equipment in the third quarter alone, and $210.7 billion over the trailing 12 months, net of proceeds from sales and incentives. It expects cash capital expenditures of about $220 billion for 2026.
That is the same trade-off other large technology companies have been making, as covered in our preview of Big Tech’s AI spending. The question investors are asking is how long the spending can run ahead of cash generation before the returns show up in revenue and margin.
Fourth-quarter outlook
For the fourth quarter, Amazon guided to net sales of $240.0 billion to $247.0 billion, growth of 12% to 16%, and operating income of $28.5 billion to $33.5 billion, compared with $25.0 billion in the fourth quarter of 2025.
A Saxo Markets note said Amazon shares fell about 7% after hours on the higher spending and the negative free cash flow. After-hours moves can change by the next session.
Editor’s take
Watch free cash flow, not operating income. Operating income rose by more than $10 billion in a year, which is a strong result on its own. But a $42.4 billion trailing cash outflow means the growth is being financed from the balance sheet, and the 2026 capital plan of about $220 billion leaves little room for the cloud business to slow down. If AWS keeps growing near 39%, the spending looks like investment. If it cools, the same spending looks like a bill.
