Amazon’s Cloud Growth Impresses Amid Missed Overall Earnings and High AI Spending

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Amazon’s Q3 report shows strong 39% growth in cloud revenue with AWS surpassing expectations, but overall earnings and revenue fell short. The company reported a striking $42.4 billion negative free cash flow over 12 months, driven by massive AI investments.

Amazon released its third-quarter earnings report highlighting a mixed financial performance. While the company fell short of analysts’ estimates for total revenue and earnings per share, its cloud division, Amazon Web Services (AWS), delivered impressive growth, reaffirming its pivotal role in Amazon’s business.

Net sales increased 12% year-over-year to $201.9 billion, marginally below the $202.2 billion analysts had anticipated. Earnings per share came in at $1.89, also lower than the expected $1.97. However, AWS sales surged 39% to $45.98 billion, above the $45.29 billion predicted, with AWS operating income rising significantly to $17.8 billion from $11.4 billion in the comparable quarter of 2025.

The report revealed a concerning financial signal: Amazon’s free cash flow was negative $42.4 billion over the trailing twelve months, in stark contrast to positive free cash flow of $14.8 billion the previous year. This sharp cash burn was largely attributed to Amazon’s substantial investments in artificial intelligence technologies.

Amazon noted its expectation to end fiscal 2026 with approximately $220 billion in capital expenditures, primarily driven by AI development. Notably, this anticipated full-year investment approaches the projected fourth-quarter net sales range of $240 billion to $247 billion, indicating Amazon’s commitment to AI as a strategic priority despite short-term profit pressures.

This financial snapshot underscores the growing significance of AWS in Amazon’s portfolio while highlighting the costs associated with ambitious AI initiatives. The company faces the challenge of balancing innovation spending with shareholder return expectations as it moves into the critical holiday sales period.