Amazon Q3: Record 13.9% Operating Margin, AWS Up 39%, but Free Cash Flow Turns Negative
AMZN is trading near its 52-week low of $196 (12% above the low).
Summary
Amazon posted a record 13.9% operating margin and 39% AWS growth in Q3 2026, but trailing-twelve-month free cash flow fell to a $42.4 billion outflow as AI capital spending surged, with 2026 capex still guided near $220 billion.
Key Events · Earnings and Guidance · AMZN
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Q3 Sales Up 12% to $201.9B
Net sales rose 12% to $201.9 billion from $180.2 billion, or 13% excluding a $0.9 billion unfavorable FX impact; the Prime Day shift to Q2 means underlying growth would have been about 400 basis points higher.
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Record 13.9% Operating Margin
Operating income jumped to $28.1 billion from $17.4 billion, with AWS contributing $17.8 billion and North America $8.7 billion.
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AWS Accelerates to 39% Growth
AWS net sales reached $46.0 billion, a $184 billion annualized run rate, and management projects over 40% growth in both 2027 and 2028.
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Free Cash Flow Turns Negative
Trailing-twelve-month free cash flow was a $42.4 billion outflow versus a $14.8 billion inflow a year earlier, as net property and equipment purchases rose $94.8 billion year-over-year; 2026 cash capex is still expected at approximately $220 billion.
Analysis · AMZN · Trade & Services
The quarter was strong on its face: operating income of $28.1 billion at a record 13.9% margin, and AWS growing 39% to a $184 billion run rate. What changes the picture is cash. Trailing-twelve-month free cash flow swung to a $42.4 billion outflow from a $14.8 billion inflow a year earlier, driven by a $94.8 billion year-over-year jump in net capital purchases tied to AI infrastructure, with 2026 capex still guided to roughly $220 billion. Net income fell to $20.7 billion ($1.89 per diluted share) only because last year's quarter carried $9.5 billion of pre-tax Anthropic investment gains. Q4 guidance of $240.0-$247.0 billion in net sales and $28.5-$33.5 billion of operating income keeps the profit trend intact, so the debate is whether the AI buildout earns its cost of capital before the cash burn becomes a constraint.
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At the time of this filing, AMZN was trading at $220.12 on NASDAQ in the Trade & Services sector, with a market capitalization of approximately $2.6T. The 52-week trading range was $196.00 to $287.20. This filing was assessed with neutral market sentiment and an importance score of 8 out of 10.