Amazon Q3 2026 earnings: AWS grows 39% and margins hit a record, but AI building turns cash flow negative

When you stream a film or ask a chatbot a question, there is a fair chance an Amazon computer does part of the work. That quiet business, Amazon Web Services (AWS), just had its fastest growth in nearly five years. Building the next wave of those computers now costs Amazon more cash than it brings in.

The Amazon Q3 earnings 2026 report, filed with the US Securities and Exchange Commission on 29 October, covers July to September. Sales rose 12% to US$201.9 billion. Operating profit, what is left after the costs of running the business, reached a record US$28.1 billion. But over the past 12 months, Amazon spent US$42.4 billion more on buildings and equipment, mostly AI data centres, than its operations brought in.

Amazon Q3 earnings 2026: the cloud carries the quarter

• Sales: US$201.9 billion, up from US$180.2 billion. That was a little below the roughly US$202.2 billion analysts had expected, according to MarketBeat and 24/7 Wall St. Amazon says growth would have been about 4 points higher if Prime Day, its big sale, had not moved to April to June in most large countries.
• AWS: US$46.0 billion, up 39%. Its US$17.8 billion operating profit was nearly two-thirds of Amazon’s total.
• Stores: North America sales grew 6% to US$112.9 billion; international sales grew 5% to US$43.1 billion.
• Advertising: US$19.6 billion, up 12% without currency effects, down from 22% to 26% in earlier quarters. Amazon blames Prime Day timing and expects growth “in the high teens” next quarter.
• Profit: operating margin was 13.9%, Amazon’s highest ever. Net profit slipped to US$20.7 billion, or US$1.89 a share, from US$21.2 billion. The reason: large one-off gains on its investments a year earlier. Earnings per share also came in a little under the US$1.96 to US$1.97 analysts expected.

A record margin, and a cash bill to match

Free cash flow is the money left after paying for buildings and equipment. Amazon’s free cash flow over 12 months was an outflow of US$42.4 billion, against an inflow of US$14.8 billion a year earlier. Amazon says spending on property and equipment rose by US$94.8 billion, mainly for AI. In the quarter alone, it spent US$77.3 billion, more than twice a year ago.

The Amazon capex 2026 target is unchanged: about US$220 billion of cash spending on buildings and equipment this year. Andy Jassy, Amazon’s chief executive, said AWS growth is projected at “over 40%” in both 2027 and 2028. “There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years,” he said.

Alphabet’s results this week showed the same squeeze on cash, and Microsoft’s Azure grew 48% while Microsoft plans about US$170 billion of spending this financial year. The cloud race is now a spending race.

If you shop, sell, build on AWS or work at Amazon

For shoppers, the money flows into AI help and speed. Amazon says its Alexa for Shopping assistant was used by more than 400 million customers in the past year. Alexa+ has reached Australia, India and Japan, and ultra-fast Amazon Now delivery runs in over 450 towns and cities.

For independent sellers, new Seller Assistant tools handle routine jobs such as restocking and pricing. The release says nothing about seller fees.

For businesses on AWS, more capacity should mean easier access to AI computing, though prices and regional availability are worth watching.

For workers, Amazon is raising starting pay for US full-time operations staff to US$20 an hour and plans over 300,000 US holiday hires.

For savers, Amazon sits in many index funds and pension plans. This is not investment advice.

Why the bet looks sound, and where the strain shows

On balance, this is a strong business making a costly bet. AWS growth has sped up five quarters in a row, from 17% to 39% in constant currency. That suggests real demand. The stores are earning more too: North America operating profit rose to US$8.7 billion from US$4.8 billion. And cash from operations still rose 29% to US$168.3 billion.

The strain is real too. Free cash flow is deeply negative, and new data centres add costs every year as they wear out. Advertising growth slowed, partly because of Prime Day timing, and Jassy’s 40% growth figures are forecasts, not results. The likelier outcome, in our view, is that Amazon can carry this spending, because its core businesses keep producing cash. The open question is how long investors will wait.

Three numbers to watch when the holiday quarter lands

Watch whether AWS revenue growth stays near 40%, whether advertising returns to high-teens growth, and whether the record margin holds as the new buildings start to cost money. If all three hold, the spending is paying its way. If not, the cash bill will speak louder.