Amazon earnings: third quarter 2026

The quarter in brief

In the three months to September 2026, Amazon's sales rose 12% to $201.9 billion, and its operating profit, the profit from running the business before interest and tax, rose 61% to $28.1 billion.¹ The cloud computing arm, Amazon Web Services or AWS, did most of the work, and demand for artificial intelligence is the likely driver: large companies spend nearly seven times more than a year ago on Bedrock, its service for running AI models.¹ Amazon says Prime Day, its big shopping event, moving into the previous quarter took about 4 percentage points off the sales growth.¹

The bill for the growth is large: spending on data centres and equipment more than doubled to $77.3 billion, well beyond the cash the business brought in.¹ Net income, the profit after everything, dipped 2% to $20.7 billion, but only because a year ago it was lifted by $9.5 billion of one-off gains on Amazon's stake in Anthropic, the AI developer.¹ Its spending plans for the year are unchanged.¹

The figures, as the company printed them

Against what analysts expected

Earnings per share, which is net income divided by the number of shares, came in at $1.89, below the $2.01 that analysts on average had expected.² It was also down from $1.95 a year earlier.¹ The fall from a year earlier comes from last year's one-off gain on Anthropic, and this quarter carried a $1.2 billion loss outside day-to-day operations, while profit from running the business rose sharply.¹

What the company expects

For the last three months of 2026, Amazon expects operating profit of $28.5 billion to $33.5 billion, against $25.0 billion in the same quarter of 2025.¹ Even the low end of that range is above last year's figure.¹

On spending, nothing has changed: Amazon says it still expects to spend about $220 billion on equipment and buildings in 2026, mainly behind the cloud and its AI push.¹

Amazon also expects advertising sales to grow in the high teens, in percentage terms, in the final quarter.¹ It says the slowdown in the third quarter was held down by timing effects, mainly Prime Day moving earlier in the year, so it is in effect calling the slowdown temporary.¹ Getting there would mean ad growth picking up markedly within a single quarter.

The longest view comes from the boss, who projects that AWS sales will grow by more than 40% in both 2027 and 2028.¹ That is a projection rather than a formal range, set against AWS's third-quarter pace and a business now running at $184 billion of sales a year.¹ Getting there means growing faster still, for two full years, from an already very large base. In plain terms, the spending has to keep turning into paying customers at an even quicker rate.

The strong points

The cloud is accelerating. AWS sales grew 39% to $46.0 billion, its fastest pace in nearly five years, and its operating profit rose to $17.8 billion from $11.4 billion.¹ Growth has climbed from 17% to 39% over six quarters, so this is a pickup rather than a steady rate.¹ That matters because AWS keeps far more of each dollar than the shops do: its operating margin, the share of sales left as profit from running the business, rose to 38.7% from 34.6%.¹

That mix lifted the whole company to a record. Amazon's operating margin reached 13.9%, the highest it has reported, against 9.7% a year earlier.¹ All three of its business segments earned more, so the improvement was not confined to one corner.¹ Part of the jump, though, comes from a much smaller charge under other operating expenses than a year ago, $134 million against $2,875 million, which flatters the comparison somewhat.¹

Demand for AI services is the likely force behind the cloud growth. Customer spending on Bedrock, its service for running AI models, is up sharply, and AWS announced new deals with Meta, NVIDIA, OpenAI and others.¹ This shows where the new demand comes from: companies using AI models and building AI agents, software that carries out tasks on its own.

The weak points

Spending is running far ahead of cash. Amazon spent $77.3 billion on buildings and equipment in the quarter, against $42.4 billion of cash produced by its operations.¹ Over the last twelve months free cash flow, the cash left after running the business and investing in it, was an outflow of $42.4 billion, against an inflow of $14.8 billion a year before.¹ Almost all of that swing came from equipment, mainly for AI, so the build-out is no longer paid for by the business alone.¹

The gap is being filled with debt. Long-term debt rose to $173.1 billion from $65.6 billion at the end of 2025, and Amazon raised $115.1 billion of it in nine months.¹ Interest expense rose from $538 million to $1,691 million in a year.¹ Meanwhile depreciation, the yearly cost of the equipment already bought, grew at about twice the pace of sales, so the cost of the build-out is rising ahead of the revenue it is meant to bring.¹

Shopping and advertising slowed sharply. Online store sales rose 2% and advertising sales 12%, down from 15% and 26% in the previous quarter, and North America sales grew 6%.¹ The size of the advertising drop complicates any simple explanation: growth there had held at 22% for four quarters and was roughly halved.¹ Advertising is a high-earning business for Amazon, so a slower ad business leaves the company's profit leaning even more heavily on the cloud.

What to watch

The question is whether the spending is a bet that is paying off or a gap that becomes a burden. Two signals move before Amazon's own results do.

The first is what the big AI developers and large companies say they will spend on AI computing. AWS's new deals depend on those customers keeping their plans; if they trim them, the equipment Amazon is buying earns less than hoped, and the cash shortfall lasts longer. If their plans keep growing, the case for the spending strengthens. The prices charged in the market for renting AI computing power are a useful companion: firm prices suggest demand is still outrunning supply, while falling prices would hint at too much capacity being built.

The second is the cost of money. Amazon is now borrowing heavily, so the interest rates it pays when it next raises debt show whether lenders remain comfortable funding the build-out. Dearer borrowing would make each dollar of the gap more expensive.

On the shopping side, Amazon's account of the advertising slowdown as a matter of timing can be tested against what advertisers say about their budgets for the holiday season: bigger budgets would support it, flat ones would not. The next results are simply the next check on whether these trends hold.

Our verdict on the quarter

In all, a strong report. The cloud business is growing faster than it has in years, and because it keeps so much more of each dollar than the shops, it carried the whole company to its most profitable quarter of running the business yet, with Amazon expecting more next quarter. The real soft spot is the cost of getting there: spending far beyond the cash the business makes, paid for with fast-rising debt and a growing interest bill, alongside a clear slowdown in shopping and advertising.

Notes

1. Amazon's results release, 29 October 2026: sec.gov. ↩
2. Nasdaq's earnings calendar, 29 October 2026. ↩