Amazon shares fell in extended trading as investors focused on accelerating artificial-intelligence spending and negative free cash flow despite the strongest growth at Amazon Web Services in nearly five years.
AWS revenue increased 39% to $46 billion during the third quarter, pushing the cloud operation to an annualized revenue run rate of approximately $184 billion. AWS operating income reached $17.8 billion, compared with $11.4 billion a year earlier.
Amazon’s total quarterly sales increased 12% to $201.9 billion, while operating income climbed to $28.1 billion from $17.4 billion. The resulting 13.9% operating margin was the highest in Amazon’s history.
The concern was cash generation. Trailing-12-month free cash flow deteriorated to an outflow of $42.4 billion as purchases of property and equipment increased sharply, primarily because of investment in artificial intelligence. Amazon continues to expect approximately $220 billion in 2026 cash capital expenditures.
For the fourth quarter, Amazon expects sales of $240 billion to $247 billion and operating income between $28.5 billion and $33.5 billion.
The report highlights the tension running through the AI investment cycle. Demand for cloud computing remains exceptionally strong, but investors are increasingly evaluating whether the extraordinary amount of cash required to construct AI infrastructure will generate adequate returns.
Amazon’s next test will be whether accelerating AWS growth can translate into stronger free cash flow while the company continues expanding data-center capacity and enters the critical holiday retail quarter.
