Amazon reported disappointing third-quarter results that sent its stock down more than 6% in extended trading. The company posted negative free cash flow of $42.4 billion for the trailing twelve-month period, representing a significant swing from the prior year and marking the second consecutive quarter of negative free cash flow. The company attributed the shortfall primarily to increased purchases of property and equipment related to its artificial intelligence investments.
Capital expenditures during the quarter reached $77.3 billion, substantially above analyst estimates of $58.7 billion and up from $35.1 billion in the prior year. Despite these elevated spending levels, Amazon maintained its full-year 2026 capital expenditure guidance at $220 billion. However, Chief Executive Andy Jassy indicated the company expects to increase spending further next year, stating it will “spend meaningfully more in 2027.” Jassy also expressed confidence in the returns on these investments, saying Amazon has a “clear line of sight to attractive financial returns.”
Amazon’s cloud computing segment, AWS, demonstrated strong momentum with revenue climbing 39% year over year to $45.98 billion, surpassing consensus forecasts. Jassy projected growth rates of over 40% for AWS in the following two years and suggested the segment could become a $1 trillion revenue business within five to ten years. The company highlighted growing adoption of its Bedrock AI model marketplace and its proprietary Trainium and Graviton chips, which Jassy noted are growing at triple-digit percentage rates annually. Amazon also announced plans to make Trainium chips available to external customers in late 2027.
Results were less robust in other segments. Online sales rose just 2% year over year to $68.47 billion, falling short of analyst expectations, while advertising revenue increased 11% to $19.64 billion but missed consensus estimates. Amazon attributed some of the weakness in retail and advertising to its decision to move Prime Day sales forward into the second quarter in certain markets to avoid conflicts with the FIFA World Cup.
Looking ahead, Amazon provided fourth-quarter revenue guidance of $240 billion to $247 billion, with the midpoint below Wall Street expectations of $244.5 billion. Third-quarter net income totaled $20.69 billion, or $1.89 per share.
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