Amazon’s cloud grew 39%. Its AI build-out drove free cash flow $42 billion below zero

The cash picture flipped as investment surged

Amazon’s third-quarter results delivered a sharp contrast: operating income rose 61% year over year to $28.1 billion, and AWS sales climbed 39.3% to $46.0 billion, while trailing-12-month free cash flow swung from a $14.8 billion inflow a year earlier to a $42.4 billion outflow. Amazon said the reversal primarily reflected a $94.8 billion year-over-year increase in property-and-equipment purchases, largely for artificial-intelligence investment. ir

That is not the same as the business running out of operating cash. Amazon generated $168.3 billion in operating cash flow over the trailing year; spending on equipment and infrastructure exceeded that inflow. TechCrunch likewise highlighted the gap between robust cloud growth and the cash cost of the build-out. ir +1

AWS is growing fast—and capacity is expensive

AWS produced $17.8 billion in operating income in the quarter, up from $11.4 billion a year earlier. But Amazon spent $77.3 billion on capital expenditures in Q3, more than twice the $35.1 billion spent in the year-earlier quarter, CNBC reported. The company maintained its 2026 cash-capex forecast of about $220 billion. ir +1

On the earnings call, CEO Andy Jassy said AWS’s backlog rose to $578 billion from $496 billion at the end of Q2 and that customers were taking capacity nearly as quickly as Amazon could install it, Axios reported. Jassy said 2027 investment would be “meaningfully more” than this year, without giving a dollar figure. The demand is real; how quickly that infrastructure earns back its cost remains the financial question. reuters +1

Cloud strength could not erase the misses

Amazon’s $201.9 billion in quarterly sales and $1.89 in diluted earnings per share fell short of analysts’ estimates cited by CNBC. ir +1 Advertising revenue also missed expectations, although Amazon said the shift of Prime Day into Q2 in most large countries distorted the year-over-year comparison. ir +1 Its Q4 sales forecast of $240 billion to $247 billion had a midpoint slightly below the LSEG consensus estimate of $244.51 billion. ir +1

The market’s immediate response reflected that mixed report: Amazon shares fell 4.3% in regular trading and dropped as much as 7% after hours, Reuters reported. The next test is whether holiday-quarter sales land inside the forecast—and whether AWS’s rapid growth can translate into returns on a build-out whose scale is still increasing. reuters +1