Amazon’s third-quarter 2026 results painted a study in contrasts: robust top-line growth and record operating margins driven largely by AWS, paired with mounting cash-flow pressure as heavy AI investments and capital expenditures weigh on liquidity. Revenue rose to $201.9 billion, operating income jumped sharply, yet free cash flow turned negative for the trailing year—signs that Amazon is balancing a profitable core with aggressive, expensive bets on AI infrastructure.
A quarter of strong margins
Operating income climbed 61% year-over-year to $28.1 billion, and operating margins hit an all-time high of 13.9%. Those gains were steered primarily by the performance of AWS, which continues to contribute a disproportionate share of profit relative to its revenue slice. Net income dipped slightly to $20.7 billion, reflecting the absence of a $9.5 billion pre-tax gain from last year’s Anthropic investment that boosted results in the prior period.
The AWS engine
AWS reported revenue of $46 billion, an increase of 39.3% year-over-year—the fastest pace in nearly five years. AWS operating income rose 55% to $17.8 billion, meaning the cloud arm accounted for roughly 63% of Amazon’s total operating income while representing less than a quarter of consolidated revenue. AWS’s annualized revenue run rate is now about $184 billion. Amazon expects AWS revenue growth of more than 40% in both 2027 and 2028, driven by strong demand for AI services. Amazon Bedrock saw token volume grow nearly 17-fold year-over-year, and Fortune 500 spending on Bedrock increased nearly sevenfold.
How Amazon stacks up in the cloud race
While AWS remains the largest cloud business by revenue, competitors are showing different growth dynamics. Microsoft’s Azure reported $33.2 billion in revenue, up about 48% year-over-year, and Google Cloud reported $30.7 billion, an extraordinary 103% increase (noting that Google Cloud’s figures also include services like Google Workspace). The three providers are thus moving at different paces: AWS leads in scale, Azure in strong growth, and Google Cloud in rapid percentage expansion from a smaller base.
Retail, advertising and cash-flow pressure
Outside of cloud, Amazon’s North American retail revenue was $112.9 billion, up 6%, and international revenue rose 5% to $43.1 billion. Advertising revenue reached $19.6 billion, an 11% increase but a notable slowdown from the prior quarter’s 26% growth rate. Despite solid operating performance, Amazon’s stock traded down nearly 7% after hours as investors digested the cash-flow implications of heavy AI and infrastructure spending. Free cash flow for the trailing 12 months turned negative $42.4 billion, compared with positive $14.8 billion a year earlier. Amazon also indicated plans for sizeable capital expenditures—projecting approximately $220 billion in 2026—outpacing the spending plans announced by Microsoft and Google.
Guidance and what’s next
For the fourth quarter, Amazon guided revenue between $240 billion and $247 billion, implying growth of 12% to 16% year-over-year, with expected operating income between $28.5 billion and $33.5 billion. The picture that emerges is a company with a highly profitable cloud business that is expanding aggressively into AI infrastructure, accepting near-term cash-flow strain in pursuit of long-term platform leadership. How investors and customers respond to the tradeoff between margin strength and negative free cash flow will shape Amazon’s narrative into 2027 and beyond.
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