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Amazon reported booming cloud revenue but otherwise missed expectations
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- DeepHorus
Amazon reported third-quarter earnings on Thursday, missing analyst expectations for total revenue and earnings per share. Net sales rose 12% to $201.9 billion, below the $202.2 billion FactSet consensus. Fully diluted earnings per share were $1.89, missing the expected $1.97. Investors also weighed troubling cash-flow figures.
The brightest spot was Amazon Web Services, which exceeded forecasts and grew 39% year over year. AWS sales reached $45.98 billion, ahead of the $45.29 billion analysts expected. The cloud unit's operating income rose to $17.8 billion, compared with $11.4 billion in the third quarter of 2025. That performance underscored cloud computing's growing role in Amazon's profitability.
The most alarming number was free cash flow, which fell to negative $42.4 billion for the trailing 12 months. A year earlier, Amazon reported positive free cash flow of $14.8 billion for the same period. The swing means the company spent far more cash than it generated. Amazon attributed much of the spending to investments in artificial intelligence.
Amazon reiterated that it expects cash capital expenditures of about $220 billion for 2026. The company forecast fourth-quarter net sales of $240 billion to $247 billion. Because the holiday season typically makes the fourth quarter a retailer's biggest, the capex figure is nearly as large as expected quarterly sales. That comparison highlighted the scale of Amazon's AI bet.
The mixed report left investors with a difficult picture. Cloud growth and AWS profitability offered clear support, but weak cash flow and missed headline numbers raised concerns. Amazon's aggressive AI spending could shape its performance well into next year.
Amazon has one quarter left in its fiscal year to justify that outlay. The report shows tension between heavy AI investment and near-term financial returns. Investors will likely watch cash flow and AWS growth closely.
