Amazon Q3: AWS Sales Grow 39%, Fastest in Nearly Five Years, as 2026 Capex Heads to $220 Billion
Net sales rose 12% to $201.9 billion and operating margin hit a record 13.9%, while trailing free cash flow turned negative on AI spending.
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Amazon reported third-quarter results on October 29, with net sales up 12% to $201.9 billion and Amazon Web Services growing 39%, the cloud unit's fastest pace in nearly five years, according to the company's filing.
The numbers
- Net sales: $201.9 billion, up from $180.2 billion (13% excluding currency effects)
- Operating income: $28.1 billion, versus $17.4 billion a year earlier; the 13.9% operating margin is the highest in the company's history
- Net income: $20.7 billion, or $1.89 per diluted share, versus $21.2 billion and $1.95 a year earlier. The prior-year figure included $9.5 billion in pre-tax gains on Amazon's Anthropic investment
- AWS: $46.0 billion in sales, a $184 billion annualized run rate, with operating income of $17.8 billion, up from $11.4 billion
Amazon said moving Prime Day into the second quarter in most large countries reduced third-quarter sales growth by about 400 basis points.
Spending and cash flow
Purchases of property and equipment totaled $77.3 billion in the quarter. Amazon expects full-year 2026 cash capital expenditures of about $220 billion. Trailing-twelve-month operating cash flow rose 29% to $168.3 billion, but free cash flow was an outflow of $42.4 billion, which the company attributed to AI-related investment.
Outlook
For the fourth quarter, Amazon guided to net sales of $240 billion to $247 billion, growth of 12% to 16%, and operating income of $28.5 billion to $33.5 billion. Management projects AWS growth above 40% in both 2027 and 2028, and expects advertising revenue to grow at a high-teens rate.
CEO Andy Jassy said the AWS investment in functionality and infrastructure "is working."
Other items in the release
- Headcount was 1,638,000 at quarter end, up 4% from a year earlier, and Amazon plans to hire more than 300,000 seasonal and other workers for the holidays
- Minimum starting pay for U.S. full-time operations employees will rise to $20 an hour
- Amazon said it acquired DuckLabs, the company behind the DuckDB database
- Zoox now operates in 12 U.S. cities, and initial Amazon Leo satellite service is on track to begin later this year
Amazon's results arrived the same week as quarterly reports from Alphabet, Microsoft and Meta, all of which have reported heavy AI infrastructure spending.
