Amazon Earnings: AWS Grows 39% in Q3 2026, but EPS Miss and Negative Free Cash Flow Send Shares Lower
Amazon earnings for the third quarter of 2026 showed the company’s cloud unit growing at its fastest pace in nearly five years, but the stock fell sharply after the report. Amazon.com, Inc. (NASDAQ: AMZN) said on Oct. 29 that Amazon Web Services (AWS) revenue rose 39% to $46.0 billion, while earnings per share of $1.89 came in below analyst estimates. Amazon shares were down about 7% in premarket trading Friday, Oct. 30.
The figures below come from Amazon’s third-quarter earnings release filed with the SEC unless another source is named.
Amazon Earnings at a Glance: Q3 2026 Key Numbers
| Metric (quarter ended Sept. 30) | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Net sales | $201.9 billion | $180.2 billion | +12% |
| AWS segment sales | $46.0 billion | — | +39% |
| North America segment sales | $112.9 billion | — | +6% |
| International segment sales | $43.1 billion | — | +5% (+8% ex-FX) |
| Advertising services | $19.6 billion | $17.7 billion | +11% |
| Operating income | $28.1 billion | $17.4 billion | +61% |
| AWS operating income | $17.8 billion | $11.4 billion | +56% |
| Net income | $20.7 billion | $21.2 billion | −2% |
| Diluted EPS | $1.89 | $1.95 | −3% |
| Free cash flow (trailing 12 months) | −$42.4 billion | +$14.8 billion | — |
What Amazon Reported
Verified facts from the earnings release
- Record margin: Operating income was $28.1 billion and the operating margin was 13.9%, which Amazon called its highest ever.
- AWS acceleration: AWS sales rose 39% to $46.0 billion, which the company said puts the unit at a $184 billion annualized revenue run rate.
- Prime Day shift: Prime Day fell in the second quarter this year in most large countries, versus entirely in the third quarter in 2025. Amazon said overall growth would have been about 4 percentage points higher without that shift.
- Lower net income: Net income fell to $20.7 billion. Amazon said this was mainly because the year-earlier quarter included $9.5 billion in pre-tax gains from its investment in Anthropic.
- Cash flow: Trailing 12-month operating cash flow rose 29% to $168.3 billion. Free cash flow was an outflow of $42.4 billion, which Amazon said came from a $94.8 billion year-over-year increase in property and equipment purchases, mostly for artificial intelligence.
Company statements
In the release, President and CEO Andy Jassy said AWS was projected to grow faster than 40% in both 2027 and 2028. He also said, “There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years.” According to GeekWire, Jassy said on the earnings call that the two businesses he meant are AWS and Amazon’s stores business, that AWS has a $578 billion backlog of contracted future revenue, and that Amazon expects to spend “meaningfully more” on capital projects in 2027 than in 2026.
Why the Stock Fell After Amazon Earnings
Market reaction (reported): GeekWire reported that EPS of $1.89 missed analysts’ $1.97 estimate and that revenue was just under estimates, though at the top of Amazon’s own forecast range. Operating income beat expectations. Shares fell more than 7% in after-hours trading on Oct. 29 after closing down about 4% in the regular session. Yahoo Finance data showed the stock at $226.20 in early premarket trading Friday, down 7.2% from Thursday’s $243.79 close.
Analysis: The quarter set a familiar 2026 earnings-season pattern against itself. Cloud demand is strong, but heavy AI infrastructure spending has pushed free cash flow below zero. Amazon kept its 2026 forecast of about $220 billion in cash capital spending, and Jassy’s comments point to higher spending next year. On Thursday the same concern hit Alphabet, which closed 12.6% lower after its own results, according to Stock Titan.
Fourth-Quarter Guidance
| Q4 2026 guidance item | Amazon forecast | Comparison |
|---|---|---|
| Net sales | $240.0–$247.0 billion (+12% to +16%) | Includes ~60 bps foreign-exchange headwind |
| Operating income | $28.5–$33.5 billion | $25.0 billion in Q4 2025 |
| Advertising revenue growth | “High teens” year over year | 12% ex-FX in Q3 2026 |
| 2026 cash capital expenditures | About $220 billion | Unchanged |
GeekWire reported that Wall Street had expected fourth-quarter operating income of about $33.2 billion, near the top of Amazon’s range, citing analyst Dan Ives. It also reported that CFO Brian Olsavsky said costs for Amazon Leo, the company’s satellite internet service, are weighing on the fourth-quarter profit outlook ahead of its launch.
Company Background
Amazon, based in Seattle, runs online and physical retail, third-party seller services, advertising, subscriptions such as Prime, and AWS, the cloud computing unit. AWS produced $17.8 billion of the company’s $28.1 billion in third-quarter operating income. Third-party seller services grew 9% to $46.5 billion in the quarter, and GeekWire noted AWS revenue came within about $500 million of it.
Context: Big Tech’s AI Spending Test
- Alphabet (Oct. 28) reported Google Cloud revenue up 103% to $30.7 billion, per its earnings release. The stock then had its worst drop on record, according to the Associated Press.
- Microsoft (Oct. 28) reported Azure revenue growth of 48% and Microsoft Cloud revenue of $63.9 billion, per its earnings release.
- Earlier this week, Vanderbiltreport.com covered the Anthropic IPO filing. Amazon is an investor in Anthropic.
Next Steps for Amazon
- Regular trading today (Oct. 30): The first full session after the report.
- Amazon Leo: The company says its satellite internet service is preparing to launch later this year.
- AWS re:Invent: AWS’s annual conference is a few weeks away, according to GeekWire.
- Q4 results: Amazon’s next report will show results against the $240–$247 billion sales guidance.
Related on Vanderbiltreport.com: RingCentral Earnings: Q3 Profit Beats Estimates · Stock Market Outlook: Fed and Big Tech Earnings Loom · The Week Ahead (Oct. 26–Nov. 1)
Sources
- Amazon.com, Inc. — Q3 2026 earnings release (SEC Form 8-K, Exhibit 99.1), Oct. 29, 2026
- GeekWire — AWS growth hits 39%, its fastest in nearly five years, as Amazon misses on earnings
- Yahoo Finance — AMZN quote
- Stock Titan — Stock Market Today, Oct. 29, 2026
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