AWS Growth Offsets Part of Amazon’s Third-Quarter Shortfall

Amazon reported third-quarter net sales of $201.9 billion and fully diluted earnings per share of $1.89, missing FactSet analyst expectations of $202.2 billion and $1.97 respectively. Its Amazon Web Services unit was the standout: AWS sales rose 39% from the year-ago quarter to $45.98 billion, above the $45.29 billion expected by analysts.

AWS operating income reached $17.8 billion, compared with $11.4 billion in the third quarter of 2025. The cloud business therefore delivered stronger revenue growth while Amazon’s consolidated sales and earnings fell short of the market’s targets.

Cloud performance contrasts with group-level pressure

The earnings release contained a further figure that unsettled investors. Free cash flow for the trailing 12 months was negative $42.4 billion, a reversal from positive free cash flow of $14.8 billion for the trailing 12 months ended September 30, 2025.

Amazon said the heavy spending was driven largely by investments in AI. The company reiterated its expectation of approximately $220 billion in cash capital expenditures for 2026, underscoring the scale of infrastructure investment being made alongside the expansion of its cloud operations.

The spending context includes Amazon’s relationship with Anthropic's AWS computing commitment as a major customer and computing commitment for AWS, while the latest results show how strongly cloud demand is contributing to the company’s revenue mix.

Capital expenditure remains central to the outlook

For the fourth quarter, Amazon forecast net sales of $240 billion to $247 billion. The period is typically its largest because of holiday shopping, yet the full-year capital-expenditure expectation is close to the revenue range projected for that single quarter.

The figures place two developments side by side: AWS exceeded revenue expectations and expanded operating income, while the wider company faces a sharp deterioration in trailing free cash flow. Amazon attributes the spending primarily to AI investments rather than presenting it as an isolated change in cash generation.

For businesses using AWS or planning cloud capacity, the practical implication is to track both the service’s growth and the investment cycle behind it: demand is rising, but Amazon’s reported AI infrastructure build-out is consuming substantial cash.