Amazon's cloud business is growing at its fastest pace in nearly five years, and the bill for building it has pushed the company's free cash flow deep into negative territory. In third-quarter results released on Thursday, October 29, for the quarter ended September 30, 2026, Amazon Web Services sales climbed 39 percent to 46.0 billion dollars, taking the cloud unit to a 184 billion dollar annualized revenue run rate.
The strength was not confined to the cloud. Company-wide net sales rose 12 percent to 201.9 billion dollars, up from 180.2 billion dollars a year earlier, and operating income jumped to 28.1 billion dollars from 17.4 billion dollars. AWS alone contributed 17.8 billion dollars of operating income, up from 11.4 billion dollars, which means the cloud division now produces the clear majority of Amazon's operating profit. Net income, however, slipped slightly to 20.7 billion dollars, or 1.89 dollars per diluted share, from 21.2 billion dollars, or 1.95 dollars per share, a year ago.
The cash flow statement tells the other half of the story. Operating cash flow for the trailing twelve months rose 29 percent to 168.3 billion dollars, a sign the underlying businesses are generating more cash than ever. Yet free cash flow swung to an outflow of 42.4 billion dollars over the same period, compared with an inflow of 14.8 billion dollars a year earlier. Amazon attributed the swing primarily to a 94.8 billion dollar year-over-year increase in purchases of property and equipment, net of proceeds from sales and incentives, and said those purchases primarily reflect investments in artificial intelligence.
That spending is not about to slow. Amazon continues to expect cash capital expenditures of approximately 220 billion dollars for 2026, most of it going into the data centers, servers, chips and networking gear that AWS needs to meet demand for AI training and inference. Chief executive Andy Jassy defended the pace, saying the company's AWS investment in functionality and infrastructure is working, and Amazon projected that AWS revenue growth could exceed 40 percent in both 2027 and 2028.
Investors, though, are increasingly asking when the spending turns into returns. Amazon shares fell sharply in after-hours trading following the report, and the unease spread overseas on Friday: South Korea's Kospi index closed down 3.48 percent, with memory maker SK Hynix falling 7.08 percent and Samsung Electronics dropping 3.02 percent, even though both chipmakers had posted strong earnings of their own earlier in the week. The reaction underlines a tension running through the whole AI supply chain — the same capital spending that worries cloud investors is the revenue that chip, memory and server suppliers depend on.
For enterprise IT buyers, the near-term picture is more straightforward. AWS growing at 39 percent, with management guiding to even faster growth ahead, signals continued aggressive capacity expansion, which historically has meant broader service availability and competitive pricing pressure across the cloud market. Amazon guided fourth-quarter net sales to between 240.0 billion and 247.0 billion dollars, growth of 12 to 16 percent, anticipating an unfavorable foreign-exchange impact of approximately 60 basis points.
The open question is financial, not technical. Amazon is generating record operating profit and record operating cash flow while spending at a rate that still leaves free cash flow negative. As long as AWS growth holds near 40 percent, the company can argue the buildout is paying for itself in future revenue. If that growth falters before the new capacity is fully absorbed, the 220 billion dollar question will get much harder to answer.