Amazon’s cloud business has just delivered its fastest growth in nearly five years — and it still was not enough to satisfy investors. Amazon Web Services (AWS) grew 39% in the third quarter of 2026, to $45.98 billion, but the wider company missed Wall Street’s headline earnings and revenue expectations, and its shares fell more than 7% in after-hours trading on Thursday.
The mixed result captures the central tension of this earnings season: demand for artificial-intelligence infrastructure is accelerating, but the bill for building it is now so large that it is reshaping even the world’s biggest technology companies.
Amazon reported total net sales of $201.9 billion for the quarter ended September 30, up 12% from a year earlier. That was just below the roughly $202.2–$202.3 billion analysts had expected — a small miss in percentage terms, but a miss nonetheless. Earnings per share came in at $1.89, below the $1.96–$1.97 consensus range reported by analysts. Net income was $20.7 billion, down from $21.2 billion a year earlier, a decline Amazon attributed mainly to a $9.5 billion pre-tax gain on its Anthropic stake that had lifted the prior-year quarter.
AWS: the bright spot
The cloud division was the clear standout. AWS revenue of $45.98 billion beat the roughly $45.3 billion analysts had projected, and its 39.3% growth — 39% excluding currency effects — was its fastest since late 2021, quickening from about 37% in the previous quarter. AWS operating income rose to $17.8 billion, at a 38.7% margin, and the unit is now running at a $184 billion annual revenue pace.
Chief executive Andy Jassy told investors on the earnings call that AWS has a contracted-revenue backlog of $578 billion, more than double a year earlier, and that he expects AWS growth of more than 40% in both 2027 and 2028. In other words, Amazon believes the cloud acceleration still has further to run — if it can build the data centres fast enough.
That “if” is where the quarter turned. Amazon spent $77.3 billion on property and equipment in the quarter, far above expectations, and held its full-year 2026 capital-spending plan at about $220 billion — nearly double the $128 billion spent in all of 2025. Jassy said Amazon will spend “meaningfully more” on capital projects in 2027 than in 2026.
The cash-flow cost
The spending has flipped Amazon’s cash flow. Over the trailing twelve months, free cash flow swung to an outflow of $42.4 billion, compared with an inflow of $14.8 billion a year earlier, driven by the surge in property and equipment purchases for AI infrastructure. Long-term debt has also risen sharply as Amazon borrows to fund the buildout, and quarterly interest expense has more than tripled to about $1.7 billion, according to earnings coverage.
There were other soft spots. Advertising revenue of $19.64 billion, up 11% year over year, fell short of the roughly $20.82 billion expected, with Amazon pointing to Prime Day timing effects. Operating income, however, was a genuine beat: at $28.1 billion, up 61% year over year, it topped the roughly $26.1 billion expected, giving Amazon a 13.9% operating margin that the company called its highest ever.
For the holiday quarter — Amazon’s biggest selling season — the company guided net sales of $240 billion to $247 billion and operating income of $28.5 billion to $33.5 billion, roughly in line with consensus. That guidance, rather than a sharp downgrade, is why some analysts framed the sell-off as a reaction to the earnings miss and the spending trajectory, not to a collapse in demand.
Why it matters
Amazon’s quarter sits alongside a bruising week for AI-infrastructure stocks. Alphabet fell sharply on its own earnings and AI-spending fears earlier in the week, and Intel, reporting the same evening, also sold off on weak guidance despite strong data-centre growth. The pattern is consistent: investors are no longer rewarding AI growth alone. They want evidence that the enormous capital spending converts into profit and cash flow, and on that test Amazon’s quarter — record operating margin, but negative trailing free cash flow — gave them both arguments at once.
What happens next depends on two things Amazon itself flagged: whether AWS really does sustain growth above 40% in 2027 and 2028, and whether the spending peak it is signalling for next year starts to moderate after that. Until then, the market’s verdict on Thursday was clear enough: even the fastest cloud growth in five years is not, on its own, enough.
What remains uncertain
Analyst estimates cited here vary slightly by data provider — EPS consensus is reported as $1.96 by LSEG and $1.97 elsewhere, and revenue consensus as $202.2–$202.3 billion — so the size of the miss should be read as small, not dramatic. After-hours share moves also fluctuated during Thursday evening trading, with reports of an early drop of about 11% narrowing; the “more than 7%” figure reflects the after-hours fall reported once trading settled. Amazon’s 2027 spending plans are described as “meaningfully more” than 2026, without a precise figure yet.
FAQ: Did Amazon beat or miss in Q3 2026? It missed on headline revenue and earnings per share, but beat on AWS revenue and operating income. How fast did AWS grow? 39% year over year, to $45.98 billion — its fastest pace in nearly five years. Why did Amazon shares fall? Investors focused on the EPS miss, the advertising shortfall, and the scale of AI capital spending, which pushed trailing free cash flow to a $42.4 billion outflow. What is Amazon guiding for Q4? Net sales of $240–$247 billion and operating income of $28.5–$33.5 billion, roughly in line with expectations.
Sources: GeekWire, “AWS growth hits 39%, its fastest in nearly five years, as Amazon misses on earnings” — https://www.geekwire.com/2026/aws-growth-hits-39-its-fastest-in-nearly-five-years-as-amazon-misses-on-earnings/ ; The Motley Fool, “AWS Jumps 39% as Amazon’s Cash Flow Sinks: Rapid Earnings Reaction” — https://www.fool.com/investing/2026/10/29/aws-jumps-39-as-amazons-cash-flow-sinks-rapid-earn/ ; ASTIG (Associated Press-based), “Amazon’s cloud grew 39 percent while free cash flow went to negative $42 billion” — https://astig.ph/amazon-q3-2026-aws-39-percent-philippine-region/
