Amazon misses earnings estimates as AI spending pushes free cash flow to negative $42.4 billion

Amazon’s cloud business grew 39%, and its operating margin reached a record. Yet its October 29 earnings release also showed the cost of that growth: AI infrastructure spending helped push trailing-12-month free cash flow to negative $42.4 billion. Third-quarter sales and earnings missed Wall Street estimates, and shares fell 6.5% in after-hours trading.

A miss alongside record operating margins

The quarter ended September 30 produced more revenue and much higher operating profit than a year earlier. But the sales increase did not clear analysts’ expectations. MT Newswires, citing FactSet consensus figures, reported these gaps between Amazon’s results and Wall Street’s forecasts:

• Net sales rose 12% to $201.94 billion, below the $202.22 billion consensus. That was a $280 million shortfall against the estimate.
• Earnings came in at $1.89 per diluted share, down from $1.95 a year earlier and below the $1.97 consensus.

The earnings decline needs an accounting distinction. Net income fell to $20.7 billion from $21.2 billion. Amazon attributed that decrease primarily to $9.5 billion in pretax gains on its Anthropic investments included in the prior-year quarter. Those gains were recorded outside operating income, rather than as profit from running Amazon’s businesses.

Operating income moved the other way, rising to $28.1 billion from $17.4 billion. Amazon’s 13.9% operating margin was its highest ever. The sales comparison also had a calendar wrinkle: Prime Day moved into the second quarter for most large countries, versus entirely in the third quarter last year. Amazon said growth would have been about four percentage points higher without that shift.

Cash generation rose. Equipment spending rose faster.

The cash-flow figures reveal a different pressure from the earnings miss. Amazon generated more cash from operations over the past year, not less. Operating cash flow increased 29%. But that improvement was overwhelmed by the increase in property and equipment purchases, leaving free cash flow deeply negative.

Two cash measures, opposite directions

Operating cash flow

$130.7 billion→$168.3 billion

USD billions

Trailing-12-month operating cash flow, comparing periods ended September 30, 2025 and 2026.

Free cash flow

$14.8 billion→−$42.4 billion

USD billions

Trailing-12-month free cash flow over the same two periods, not cash flow for the third quarter alone.

Amazon said purchases of property and equipment, after proceeds from sales and incentives, increased $94.8 billion year over year. The increase primarily reflected AI investments. That is the central distinction in the cash figures: stronger cash generation from the business was not enough to cover the much larger infrastructure outlay.

Amazon nevertheless maintained its 2026 capital expenditure outlook at about $220 billion. The unchanged forecast puts the negative cash-flow result alongside a continued commitment to spending, rather than a newly reduced investment budget.

AWS supplies the growth case

AWS, Amazon’s cloud-computing division, supplied a strong counterweight to the cash burden. Quarterly sales reached about $46 billion, with 39.3% growth—its fastest pace in nearly five years. Its operating income increased to $17.8 billion from $11.4 billion, accounting for more than half of Amazon’s total operating profit.

CEO Andy Jassy said AWS investment in functionality and infrastructure was working. He projected revenue growth above 40% in both 2027 and 2028. Those are management forecasts, not completed results; they set out the growth Amazon expects as it continues funding the buildout.

For the nearer term, Amazon forecast fourth-quarter company-wide sales of $240 billion to $247 billion. Wall Street’s $244.17 billion estimate sits within that range. The outlook leaves room for sales on either side of consensus, unlike the third-quarter result, which came in below the estimate.