Amazon Q3 profit misses estimates as AI spending drives cash flow negative
Amazon's third-quarter profit and revenue fell short of Wall Street expectations as heavy artificial intelligence spending pushed free cash flow deeply negative.
KEY POINTS
- Third-quarter revenue of $201.9 billion missed the $202.31 billion analyst estimate
- Net income fell to $20.7 billion from $21.2 billion a year earlier
- AWS revenue grew about 39% to $46 billion, the fastest pace in nearly five years
- Advertising revenue of $19.64 billion fell short of the $20.82 billion expected
- Free cash flow turned negative at $42.4 billion over the past year
Amazon reported third-quarter revenue of $201.9 billion, a 12% increase from the same period in 2025 but slightly below the $202.31 billion expected by analysts. Net income totaled $20.7 billion, down from $21.2 billion a year earlier, while earnings per share came in at $1.89 against an estimated $1.96. The company attributed the decline to gains of $9.5 billion from its investment in Anthropic recorded in the third quarter of 2025, which raised the prior-year comparison base.
Amazon Web Services revenue rose approximately 39% to $46 billion, marking the cloud unit's fastest growth pace in nearly five years and topping the expected $45.29 billion. Operating income for AWS reached $17.8 billion, up from $11.4 billion in the third quarter of 2025, and annualized revenue for the division reached $184 billion. Chief Executive Officer Andy Jassy said infrastructure and feature investments are paying off and projected division revenue growth of more than 40% in both 2027 and 2028.
“Investors in Amazon and other tech giants are closely watching the tightrope that so-called hyperscalers are walking, and any sign of a slowdown scares those worried about a bubble popping.”
Advertising revenue reached $19.64 billion, missing the $20.82 billion expected by analysts, though the business grew 12% year over year. Projected holiday-quarter operating profit also came in below Wall Street estimates. Amazon reiterated its expectation of about $220 billion in 2026 capital expenditures as it continues spending at unprecedented rates on AI data centers.
Free cash flow swung from positive $14.8 billion to negative $42.4 billion over the past year. Shares fell more than 7% in after-hours trading following the release of the results on Thursday, October 29, 2026. Amazon's report followed similar results from Microsoft and Alphabet, which also showed strong cloud growth alongside soaring AI infrastructure costs, with Alphabet reporting weaker-than-expected advertising growth.
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