Amazon’s cloud is accelerating. Its AI build-out pushed free cash flow to –$42 billion

Cash generated, then spent

Amazon reported a $42.4 billion free-cash-flow outflow for the 12 months through September, reversing a $14.8 billion inflow in the prior-year period. The company attributed the decline mainly to a $94.8 billion year-over-year increase in net purchases of property and equipment, largely for artificial-intelligence investment. This is not the same as operating cash turning negative: that measure rose 29% to $168.3 billion over the same trailing period, before equipment spending is deducted. Amazon calculates free cash flow by subtracting net property-and-equipment purchases from operating cash flow. ir

The quarterly release came October 29, covering the three months ended September 30. Amazon’s equipment purchases reached $77.3 billion in the quarter, up from $35.1 billion a year earlier and well above the $58.7 billion analysts expected, CNBC reported. The results sent shares down more than 6% in after-hours trading. cnbc Reuters likewise reported that heavy investment weighed on investors despite accelerating cloud growth. reuters

AWS is growing fast—and carrying the profit

Amazon’s third-quarter net sales rose 12% to $201.9 billion, while diluted earnings per share slipped to $1.89 from $1.95 a year earlier. Both revenue and earnings fell short of analyst forecasts, according to Forbes and TechCrunch. techcrunch +1 Operating income, by contrast, jumped to $28.1 billion from $17.4 billion, giving the company a 13.9% operating margin, its highest ever, Amazon said. ir +1

AWS revenue climbed 39% to $46.0 billion, its strongest growth rate in nearly five years, while AWS operating income rose to $17.8 billion from $11.4 billion. That cloud growth exceeded analyst expectations and helped support the group’s profit, even as online-store and advertising growth slowed. ir +1 TechCrunch also highlighted the split: cloud beat estimates as the broader results missed. techcrunch

The spending target is still rising

Amazon held its 2026 cash capital-expenditure outlook at about $220 billion. ir Chief Executive Andy Jassy told analysts spending would be “meaningfully more” in 2027, without giving a figure; Reuters and CNBC reported his comment. reuters +1 This investment is already eroding free cash flow. reuters

For the holiday quarter, Amazon forecast sales of $240 billion to $247 billion, a midpoint below analysts’ $244.5 billion estimate. reuters +1 TechCrunch noted that the full-year capital budget is almost as large as that entire quarter’s projected sales. techcrunch Jassy supplied no 2027 capital-expenditure figure. reuters