Amazon reported a negative free cash flow of $42.4 billion for the trailing twelve-month period ending in September 2026, driven by aggressive artificial intelligence capital expenditures. Despite cloud computing revenue surging 39 percent, the heavy spending and below-consensus fourth-quarter sales forecast sent shares tumbling nearly 7 percent in extended trading.
AWS Growth Climbs to 39 Percent as AI Spending Accelerates
Amazon Web Services delivered $46 billion in third-quarter revenue, marking a 39 percent year-over-year increase that topped analysts’ expectations of a 38.2 percent jump, according to data compiled by LSEG. Chief Executive Officer Andy Jassy told analysts on a conference call that the cloud unit is running at an annual revenue pace of $184 billion. He projected that revenue growth rates for AWS will exceed 40 percent in both 2027 and 2028.
The strong performance in cloud infrastructure coincides with an unprecedented level of capital investment. Amazon’s capital expenditures for the quarter reached $77.3 billion, sitting roughly $20 billion above Wall Street estimates. For the full year, the company expects total capital spending to hit $220 billion, heavily weighted toward artificial intelligence software and data center infrastructure.
BREAKING: Amazon stock, $AMZN, collapses over -12% after reporting weaker than expected Q3 earnings.The stock has now erased -$315 billion worth of market cap in after hours trading. pic.twitter.com/PktjkI1Gbx
Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028.
Andy Jassy, Chief Executive Officer
During the earnings call, Jassy also remarked that there has never been a trillion-dollar revenue business, but that Amazon may have two of them within the next five to 10 years, pointing to AWS and the company’s stores business. Highlighting demand drivers, Jassy noted that enterprise usage of AI model marketplace Bedrock and custom-designed Trainium and Graviton silicon chips continues to scale. According to Jassy, the company’s chips business is growing at triple-digit percentages year over year, with external availability of Trainium chips scheduled for late 2027.
Comparable hyperscalers faced a difficult environment during the same earnings cycle. Alphabet reported a negative free cash flow of $9.07 billion and saw its stock fall 12 percent following its quarterly release. Meanwhile, Microsoft lowered its full-year capital expenditure forecast from $175 billion to $170 billion, while Amazon and Google parent Alphabet maintained their elevated spending guidance.
Amazon $AMZN hammered on earnings 📉📉 Absolutely horrible earnings week for Mega Cap Tech 🚨 pic.twitter.com/uJ8GtmgEZw
Cash Burn Swells Amid Lower Earnings and Missed Advertising Targets
The aggressive infrastructure spending weighed heavily on the company’s financial metrics. Amazon posted negative free cash flow of $42.4 billion for the trailing twelve months, representing a 386 percent swing compared to the same period a year earlier. In the prior quarter, the company had reported a cash burn of $7.6 billion, whereas it generated $14.8 billion in the third quarter of the previous year. Diluted earnings per share came in at $1.89, falling short of the $1.96 consensus estimate polled by LSEG, and dropping from $1.95 per share reported a year earlier.
Net income decreased to $20.69 billion from $21.19 billion in the prior-year period. Financial comparisons were also impacted by a $9.5 billion pre-tax gain recorded in the third quarter of 2025 related to investments in AI startup Anthropic.
Advertising sales also missed projections, generating $19.6 billion. That 12 percent year-over-year increase fell short of the 18 percent growth expected by analysts, marking the first time in seven quarters that the ad unit missed expectations. Executives attributed the deceleration in part to the timing of Prime Day, which was moved from its traditional third-quarter window into the second quarter in most large markets to avoid overlapping with the FIFA World Cup. Despite the slowdown, Amazon recently introduced the Amazon Ads Agent in September, designed to unify its advertising console and demand-side platform to power full-funnel automated campaigns. However, some industry observers noted that buyers must remain cautious regarding whether independent data providers can verify automated performance and whether auction mechanics stay transparent.
Retail Operations Battle Freight Inflation as Holiday Outlook Disappoints
Within the consumer retail division, international revenue climbed 5 percent to $43.1 billion. Online store sales rose 2 percent to $68.5 billion, while third-party seller services climbed.
Looking ahead to the final quarter of the year, Amazon guided for net sales between $240 billion and $247 billion, alongside operating income between $28.5 billion and $33.5 billion. The midpoint of the revenue guidance trailed the average analyst estimate of $244.5 billion compiled by LSEG.
One of the craziest lines from $AMZN earnings was Andy Jassy saying "we're installing an AI accelerator about every 14 seconds" with customers taking up capacity almost as fast as AWS brings it online.And somehow we're still debating whether Amazon is spending too much on AI.