Amazon reported third-quarter 2026 revenue of $201.9 billion, matching Wall Street expectations while missing profit forecasts and issuing softer fourth-quarter sales guidance. The miss triggered a sharp after-hours stock sell-off, even as Amazon Web Services posted a 39 percent surge in revenue driven by artificial intelligence demand.
Wall Street was looking for different numbers when Amazon dropped its latest financials. Net sales reached $201.9 billion, representing a 12.1% year-over-year increase that aligned closely with consensus forecasts. Yet the bottom line stumbled. GAAP profit landed at $1.89 per share, missing consensus analyst estimates of $1.96 by 3.5%.
$AMZN Q3 Segment Growth (YoY)AWS: +39%Online Stores: +2%3P Seller Services: +9%Advertising: +11%Subscription Services: +11%Physical Stores: +2%
Net income fell to $20.7 billion from $21.2 billion in the same period a year earlier, a decline the company attributed primarily to the absence of the $9.5 billion in one-time pre-tax gains recorded last year from its investment in Anthropic. Over a five-year horizon, Amazon’s revenue base has expanded from $458 billion to $797.5 billion over the last year, translating to an annualized growth rate of 11.7%. North American revenue rose 6% to $112.9 billion during the third quarter, while international revenue increased 5% to $43.1 billion.
Investors reacted swiftly to the earnings report and forward-looking guidance. Shares dropped more than 5% in after-hours trading, sliding to $228.29 immediately following the release. The cautious tone extended to fourth-quarter projections, with the company anticipating net sales between $240 billion and $247 billion, alongside expected operating income ranging from $28.5 billion to $33.5 billion.
Worries about how AI buildout will be financed remain main drag on equities, particularly visible among hyperscalers; since early May, S&P U.S.-Listed Hyperscalers Index has fallen by roughly a quarter, while over same period, tech borrowing costs have increased significantly;… pic.twitter.com/XqtvCjW93f
AWS Growth Climbs 39 Percent While Free Cash Flow Turns Negative
While the retail and advertising segments faced headwinds, Amazon Web Services delivered its fastest growth rate in nearly five years. Cloud sales soared 39% year over year to $45.98 billion, beating analyst predictions for the unit and sustaining a $184 billion revenue run rate. AWS now generates about 63% of the company’s operating profit.
That cloud expansion comes with a heavy price tag. Aggressive capital outlays for artificial intelligence infrastructure pushed Amazon’s free cash flow deep into negative territory. The company recorded an outflow of $42.4 billion for the trailing twelve-month period, marking its second consecutive quarter of negative free cash flow as property and equipment purchases mounted. Long-term debt has climbed to about $173 billion, while quarterly interest expense rose to $1.7 billion.
$AMZN could also raise cash on its earnings day, just like $META did, and likely why they reported a week early – to front run the rest of hyperscallers needing cash.
Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028.
Andy Jassy, President and CEO, Amazon
Calendar Shifts and Advertising Slowdowns Weigh on Retail Segments
Beyond the cloud, performance across Amazon’s consumer divisions proved mixed. Subscription services revenue increased 12% to $14 billion. Meanwhile, advertising revenue decelerated to an 11% growth rate, bringing in $19.64 billion and falling short of consensus estimates.
Company executives pointed to specific operational calendar changes that distorted the quarterly comparison. Amazon decided to host its annual Prime Day shopping event in the second quarter rather than the third, intentionally avoiding a scheduling conflict with the FIFA World Cup in July. Had that event remained in the third quarter, sales growth would have tracked about 4% higher.
Capital Spending Forecasts Remain Steady Amid Tech Sector Turmoil
Amazon maintained its planned capital expenditure forecast, sticking to an expected $220 billion in spending for the year. That commitment places Amazon among the most aggressive spenders in the tech industry’s ongoing artificial intelligence data center buildout. Operational strategy accompanied workforce plans as the company prepares to hire 300,000 U.S. seasonal workers for the holidays.
The massive outlays arrive as broader market sentiment toward major tech enterprises turns cautious. Gene Munster of Deepwater Asset Management warned that Alphabet’s quarterly results served as a warning sign for Amazon. Alphabet subsequently absorbed a sharp 12% stock plunge to trade at $286.17 after reporting weaker-than-expected summer growth and high capital expenditures, raising investor sensitivity regarding the timeline for returns on infrastructure investments. Despite the immediate market pullback, Jassy maintained an optimistic long-term outlook for the company’s expansion.
Very true. As Meta said in their 8K recently everyone is competing for the same pool of money. It no longer seems endless like it did back earlier in the year.
There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years.
Andy Jassy, CEO, Amazon
