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Amazon Q3 Earnings: AWS Revenue Up 39%, AI Investment Drives Second Consecutive Quarter of Negative Free Cash Flow

Amazon released its third-quarter earnings report, with revenue of $201.94 billion and earnings per share of $1.89, both below market expectations, and its stock fell more than 7% at one point after hours. AWS revenue was $45.984 billion, up about 39% year-over-year, the fastest growth rate in nearly five years, with operating income of $17.773 billion. Because AI-related purchases of property and equipment rose to $77.26 billion, the company posted negative free cash flow for a second consecutive quarter, with an outflow of $42.4 billion over the past 12 months, and it maintained its capital expenditure forecast of $220 billion for this year.

Amazon Q3 Earnings: AWS Revenue Up 39.3%, AI Capital Expenditures Turn Free Cash Flow Negative

Amazon's net sales in Q3 2026 grew 12% year-over-year to $201.94 billion, slightly below expectations, while AWS net sales grew 39.3% year-over-year to $45.98 billion, the highest single-quarter growth rate in nearly five years. Purchases of property and equipment for the quarter reached $77.26 billion, about 1.2 times the year-ago period, and free cash flow swung from an inflow of $14.79 billion in the year-ago period to an outflow of $42.36 billion. The company maintained its full-year 2026 cash capital expenditure guidance of approximately $220 billion unchanged, and the stock fell as much as more than 10% in after-hours trading following the earnings release.

Amazon Earnings Call: AWS Expected to Grow Over 40% in 2027 and 2028, 2026 Capex Around $220 Billion

Amazon CEO Andy Jassy said on the Q3 earnings call that AWS third-quarter revenue grew 39.3% year over year to $45.98 billion, and is expected to grow over 40% in both 2027 and 2028, becoming a business with annual revenue exceeding one trillion dollars in the next 5 to 10 years. The company maintained its expectation of about $220 billion in cash capital expenditure for 2026, most of which will go to AWS, and expects spending to increase significantly in 2027. On Bedrock, spending by Fortune 500 companies grew nearly 7x year over year and total tokens grew nearly 17x, revenue commitments for Trainium and Graviton grew more than 20x year over year, and Trainium is planned to be sold externally by the end of 2027.

Amazon Q3 earnings revenue and profit miss expectations, AWS revenue up about 39% but AI investment leads to $42.4 billion cash outflow

Amazon's third-quarter revenue was $201.94 billion and earnings per share were $1.89, both below market expectations, with the after-hours stock price falling more than 7% at one point. AWS revenue was $45.984 billion, up about 39% year over year, the fastest growth in nearly five years, but free cash flow outflow over the past 12 months reached $42.4 billion, which the company said was mainly due to increased spending on AI-related property and equipment. Amazon maintained its forecast of about $220 billion in capital expenditure for 2026 and expects spending to increase significantly in 2027.

Amazon Earnings Call: AWS Quarterly Revenue of $46 Billion, Capital Expenditures to Continue Rising in 2027

Amazon's Q3 2026 earnings show AWS revenue of $46 billion, up 39.3% year over year, with $578 billion in backlog orders, and AI inference revenue accounting for more than half of AWS's AI revenue. Management expects AWS to grow at an annual rate above 40% in 2027-2028 and to approach $1 trillion in revenue within 5 to 10 years, but capital expenditures will be about $220 billion in 2026 and will rise significantly further in 2027, sending the company's shares down 7.3% after hours. The earnings call also mentioned that spending by Fortune 500 companies on Bedrock grew nearly 7x year over year, token call volume grew nearly 17x, and Trainium is planned to be sold externally by the end of 2027.

Jassy Says AWS Will Become a Trillion-Dollar Business, with About $220 Billion in Capital Expenditure in 2026

Amazon CEO Andy Jassy reiterated on the quarterly earnings call that AWS is expected to become a business with $1 trillion in annual revenue in the next 5 to 10 years, and he expects growth rates to exceed 40% in both 2027 and 2028. He said cash capital expenditure in 2026 will be about $220 billion, most of it going to AWS, and will increase significantly further in 2027; AWS revenue grew 39% year over year this quarter, with an annualized revenue scale of $184 billion. After the earnings release, Amazon's stock fell about 6% in after-hours trading.

Amazon CEO Jassy: AWS compute capacity essentially sold out through 2027, some orders locked in through 2028

Amazon CEO Andy Jassy said that driven by AI infrastructure demand, AWS's cloud computing capacity is essentially sold out through 2027, and a considerable portion of 2028 capacity has also been locked in advance. He noted that 2026 cloud compute capacity is fully booked, and that the company's announced 2026 capital expenditure plan is about $220 billion, adding that continuing to ramp up investment is not an inefficient use of funds. Jassy also said that some resources will be reserved for on-demand calls, the Bedrock inference service, and EC2.

Amazon CEO Jassy: AWS compute orders booked through 2028, enterprise AI adoption not yet widespread

In an a16z interview, Amazon CEO Andy Jassy said that even with roughly $220 billion in capital expenditure in 2026, AWS will still be unable to meet a large amount of customer demand: its main compute capacity for 2026 is already sold out, most of its 2027 capacity is booked, and a considerable portion of 2028 capacity has also received customer commitments. He described current AI demand as dumbbell-shaped—at one end are foundation model labs and a handful of fast-growing applications, and at the other are enterprises using AI to cut costs and improve efficiency—and said inference costs still need to fall substantially to drive widespread enterprise adoption. Jassy also mentioned that AWS Bedrock has integrated OpenAI models, and that both OpenAI and Anthropic have made multi-year, multi-gigawatt-scale commitments to use Trainium.

English translation is being prepared.

English translation is being prepared.