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Amazon Q3 Revenues Miss Estimates, AWS Growth Hits Near 5-Year High
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Key Takeaways
Amazon's Q3 sales rose 12% to $201.9 billion, missing estimates, while operating income surged 61%.
AWS revenues jumped 39.3% to $46 billion, marking its fastest growth in nearly five years.
Amazon expects Q4 sales of $240-$247 billion and sees AWS growing more than 40% in 2027 and 2028.
Amazon (AMZN - Free Report) reported third-quarter 2026 net income of $1.89 per diluted share, down 3% from $1.95 per share in the third quarter of 2025. Net income fell to $20.7 billion from $21.2 billion, mainly because the year-ago quarter included $9.5 billion of pre-tax gains from the company's investment in Anthropic, recorded in non-operating income (expense). "Other income (expense), net" swung to an expense of $703 million from income of $10.2 billion a year ago. The Zacks Consensus estimate for earnings was pegged at $2.01 per share.
Net sales of $201.9 billion rose 12% year over year but missed the consensus mark by 0.08%. Excluding a $0.9 billion unfavorable foreign exchange impact, net sales grew 13%. The top line landed near the upper end of management's guided range of $197-$202 billion. Prime Day moved into the second quarter this year for most large countries, whereas in 2025 it fell entirely in the third quarter. Excluding this shift, year-over-year growth would have been about 400 basis points higher.
Operating income jumped 61% year over year to $28.1 billion, above the guided range of $22.5-$26.5 billion. Operating margin expanded to 13.9%, Amazon's highest ever, from 9.7% in the year-ago quarter and 13.7% in the second quarter of 2026. The year-ago figure was weighed down by a $2.5 billion FTC legal settlement and $1.8 billion in estimated severance costs.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Net product sales rose 2% year over year to $75.3 billion from $74.1 billion. Net service sales increased 19% to $126.6 billion from $106.1 billion.
By segment, North America revenues increased 6% year over year to $112.9 billion. International revenues rose 5% to $43.1 billion, or 8% excluding FX.
Amazon Web Services (“AWS”) revenues jumped 39.3% year over year to $46 billion. That was the segment's fastest growth in nearly five years and lifted its annualized revenue run rate to $184 billion. AWS growth accelerated for the sixth straight quarter, and the segment added $3.8 billion of revenue sequentially.
Third-party seller services revenues rose 10% year over year (excluding FX) to $46.5 billion. Worldwide paid units grew 12%, and third-party sellers accounted for 61% of paid units.
Advertising services revenues increased 11% year over year (12% excluding FX) to $19.6 billion. Management said the Prime Day shift created an 850-basis-point sequential impact on third-quarter advertising growth. It also cited the absence of NBA games in the quarter and the lapping of a search engine marketing change made in the third quarter of 2025. Subscription services revenues, which include Prime membership fees, rose 11% year over year (12% excluding FX) to $14 billion.
Physical store sales rose 2% year over year to $5.71 billion from $5.58 billion. Online store sales increased 2% (excluding FX) to $68.5 billion.
AWS and AI Developments
AWS backlog reached $578 billion, growing at a triple-digit rate year over year, while AI revenues also grew at triple digits, with inference accounting for well over half. Revenue commitments for Graviton and Trainium each rose more than 20x, and customers using Amazon’s custom silicon saved more than $2 billion in the quarter. Amazon plans to sell Trainium outside AWS beginning late 2027.
Bedrock spending by Fortune 500 companies rose nearly 7x and token volume nearly 17x. New models included OpenAI’s GPT-6 family, Anthropic’s Claude Fable 5.1 and Opus 5.5, Moonshot AI’s Kimi K3 and SpaceXAI’s Grok 4.7. AWS made Continuum, its AI-powered vulnerability remediation service, generally available, while AgentCore customers deployed 2x more agents in the quarter than in the prior three quarters combined. Lambda topped a $1 billion run rate, and Amazon acquired DuckLabs, the company behind DuckDB. New agreements were signed with Meta, NVIDIA, OpenAI, Salesforce, Oracle and NATO, among others.
Consumer, Prime and Logistics
Amazon delivered more than 1.5 billion items same-day or overnight to Prime members, its fastest third-quarter speeds ever. Amazon Now expanded to more than 450 towns and cities, with items ordered up 10x. Fresh groceries and everyday essentials grew about 3x faster than the rest of the store, representing about half of units sold. Alexa for Shopping reached over 400 million customers over the past year, and Alexa+ expanded to Australia, India and Japan.
Pharmacy customers rose more than 60%, and Amazon launched Ads Agent and Full-Funnel Campaigns for advertisers. Thursday Night Football averaged 17.7 million viewers, its best start ever, while Prime Video is profitable with a run rate in the tens of billions. Amazon Leo remains on track for initial service this year and signed an agreement with AT&T. Zoox began paid robotaxi rides in Las Vegas.
Operating Details
North America segment operating income rose 82% year over year to $8.7 billion from $4.8 billion, with operating margin expanding to 7.7% from 4.5%. International segment operating income increased 32% to $1.6 billion from $1.2 billion, with operating margin rising to 3.7% from 2.9%. AWS segment operating income climbed 55% to $17.8 billion from $11.4 billion, and AWS operating margin expanded to 38.7% from 34.6%. Worldwide shipping costs rose 11% against 12% unit growth. Excluding fuel and linehaul inflation, shipping costs grew 8%.
Balance Sheet and Cash Flow
As of Sept. 30, 2026, cash and cash equivalents were $55.8 billion, down from $78.2 billion as of June 30, 2026. Marketable securities totaled $58.4 billion, up from $44.8 billion in the previous quarter.
Long-term debt was $173.1 billion at the end of the quarter, up from $128.9 billion at the end of the previous quarter.
Operating cash flow for the trailing 12 months increased 29% to $168.3 billion from $130.7 billion a year earlier.
Free cash flow for the trailing 12 months swung to an outflow of $42.4 billion from an inflow of $14.8 billion a year earlier. The swing was due to a $94.8 billion year-over-year increase in net purchases of property and equipment, mainly for AI investments. Purchases of property and equipment totaled $77.3 billion in the quarter, up 120% from $35.1 billion in the third quarter of 2025. Cash capital expenditures, net of proceeds and incentives, were $75.9 billion, mainly for AWS and AI.
Guidance
For the fourth quarter of 2026, Amazon expects net sales between $240 billion and $247 billion, or 12% to 16% growth over the fourth quarter of 2025. The outlook assumes an unfavorable foreign exchange impact of about 60 basis points. Management expects advertising revenue growth to return to the high teens in the fourth quarter.
Operating income is expected to be between $28.5 billion and $33.5 billion compared with $25 billion in the fourth quarter of 2025. That implies year-over-year growth of 14% to 34%. Amazon still expects 2026 cash capital expenditures of about $220 billion and plans to spend meaningfully more in 2027. Because capitalization of certain Leo production and launch costs is now expected to begin in the first quarter of 2027, most Leo-related costs will be expensed in the fourth quarter. Management believes AWS can grow more than 40% in both 2027 and 2028.
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Amazon Q3 Revenues Miss Estimates, AWS Growth Hits Near 5-Year High
Key Takeaways
Amazon (AMZN - Free Report) reported third-quarter 2026 net income of $1.89 per diluted share, down 3% from $1.95 per share in the third quarter of 2025. Net income fell to $20.7 billion from $21.2 billion, mainly because the year-ago quarter included $9.5 billion of pre-tax gains from the company's investment in Anthropic, recorded in non-operating income (expense). "Other income (expense), net" swung to an expense of $703 million from income of $10.2 billion a year ago. The Zacks Consensus estimate for earnings was pegged at $2.01 per share.
Net sales of $201.9 billion rose 12% year over year but missed the consensus mark by 0.08%. Excluding a $0.9 billion unfavorable foreign exchange impact, net sales grew 13%. The top line landed near the upper end of management's guided range of $197-$202 billion. Prime Day moved into the second quarter this year for most large countries, whereas in 2025 it fell entirely in the third quarter. Excluding this shift, year-over-year growth would have been about 400 basis points higher.
Operating income jumped 61% year over year to $28.1 billion, above the guided range of $22.5-$26.5 billion. Operating margin expanded to 13.9%, Amazon's highest ever, from 9.7% in the year-ago quarter and 13.7% in the second quarter of 2026. The year-ago figure was weighed down by a $2.5 billion FTC legal settlement and $1.8 billion in estimated severance costs.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. price-consensus-eps-surprise-chart | Amazon.com, Inc. Quote
Top-Line Details
Net product sales rose 2% year over year to $75.3 billion from $74.1 billion. Net service sales increased 19% to $126.6 billion from $106.1 billion.
By segment, North America revenues increased 6% year over year to $112.9 billion. International revenues rose 5% to $43.1 billion, or 8% excluding FX.
Amazon Web Services (“AWS”) revenues jumped 39.3% year over year to $46 billion. That was the segment's fastest growth in nearly five years and lifted its annualized revenue run rate to $184 billion. AWS growth accelerated for the sixth straight quarter, and the segment added $3.8 billion of revenue sequentially.
Third-party seller services revenues rose 10% year over year (excluding FX) to $46.5 billion. Worldwide paid units grew 12%, and third-party sellers accounted for 61% of paid units.
Advertising services revenues increased 11% year over year (12% excluding FX) to $19.6 billion. Management said the Prime Day shift created an 850-basis-point sequential impact on third-quarter advertising growth. It also cited the absence of NBA games in the quarter and the lapping of a search engine marketing change made in the third quarter of 2025. Subscription services revenues, which include Prime membership fees, rose 11% year over year (12% excluding FX) to $14 billion.
Physical store sales rose 2% year over year to $5.71 billion from $5.58 billion. Online store sales increased 2% (excluding FX) to $68.5 billion.
AWS and AI Developments
AWS backlog reached $578 billion, growing at a triple-digit rate year over year, while AI revenues also grew at triple digits, with inference accounting for well over half. Revenue commitments for Graviton and Trainium each rose more than 20x, and customers using Amazon’s custom silicon saved more than $2 billion in the quarter. Amazon plans to sell Trainium outside AWS beginning late 2027.
Bedrock spending by Fortune 500 companies rose nearly 7x and token volume nearly 17x. New models included OpenAI’s GPT-6 family, Anthropic’s Claude Fable 5.1 and Opus 5.5, Moonshot AI’s Kimi K3 and SpaceXAI’s Grok 4.7. AWS made Continuum, its AI-powered vulnerability remediation service, generally available, while AgentCore customers deployed 2x more agents in the quarter than in the prior three quarters combined. Lambda topped a $1 billion run rate, and Amazon acquired DuckLabs, the company behind DuckDB. New agreements were signed with Meta, NVIDIA, OpenAI, Salesforce, Oracle and NATO, among others.
Consumer, Prime and Logistics
Amazon delivered more than 1.5 billion items same-day or overnight to Prime members, its fastest third-quarter speeds ever. Amazon Now expanded to more than 450 towns and cities, with items ordered up 10x. Fresh groceries and everyday essentials grew about 3x faster than the rest of the store, representing about half of units sold. Alexa for Shopping reached over 400 million customers over the past year, and Alexa+ expanded to Australia, India and Japan.
Pharmacy customers rose more than 60%, and Amazon launched Ads Agent and Full-Funnel Campaigns for advertisers. Thursday Night Football averaged 17.7 million viewers, its best start ever, while Prime Video is profitable with a run rate in the tens of billions. Amazon Leo remains on track for initial service this year and signed an agreement with AT&T. Zoox began paid robotaxi rides in Las Vegas.
Operating Details
North America segment operating income rose 82% year over year to $8.7 billion from $4.8 billion, with operating margin expanding to 7.7% from 4.5%. International segment operating income increased 32% to $1.6 billion from $1.2 billion, with operating margin rising to 3.7% from 2.9%. AWS segment operating income climbed 55% to $17.8 billion from $11.4 billion, and AWS operating margin expanded to 38.7% from 34.6%. Worldwide shipping costs rose 11% against 12% unit growth. Excluding fuel and linehaul inflation, shipping costs grew 8%.
Balance Sheet and Cash Flow
As of Sept. 30, 2026, cash and cash equivalents were $55.8 billion, down from $78.2 billion as of June 30, 2026. Marketable securities totaled $58.4 billion, up from $44.8 billion in the previous quarter.
Long-term debt was $173.1 billion at the end of the quarter, up from $128.9 billion at the end of the previous quarter.
Operating cash flow for the trailing 12 months increased 29% to $168.3 billion from $130.7 billion a year earlier.
Free cash flow for the trailing 12 months swung to an outflow of $42.4 billion from an inflow of $14.8 billion a year earlier. The swing was due to a $94.8 billion year-over-year increase in net purchases of property and equipment, mainly for AI investments.
Purchases of property and equipment totaled $77.3 billion in the quarter, up 120% from $35.1 billion in the third quarter of 2025. Cash capital expenditures, net of proceeds and incentives, were $75.9 billion, mainly for AWS and AI.
Guidance
For the fourth quarter of 2026, Amazon expects net sales between $240 billion and $247 billion, or 12% to 16% growth over the fourth quarter of 2025. The outlook assumes an unfavorable foreign exchange impact of about 60 basis points. Management expects advertising revenue growth to return to the high teens in the fourth quarter.
Operating income is expected to be between $28.5 billion and $33.5 billion compared with $25 billion in the fourth quarter of 2025. That implies year-over-year growth of 14% to 34%. Amazon still expects 2026 cash capital expenditures of about $220 billion and plans to spend meaningfully more in 2027. Because capitalization of certain Leo production and launch costs is now expected to begin in the first quarter of 2027, most Leo-related costs will be expensed in the fourth quarter. Management believes AWS can grow more than 40% in both 2027 and 2028.
Zacks Rank & Stocks to Consider
Amazon currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Retail-Wholesale sector are Yum China (YUMC - Free Report) , FIGS (FIGS - Free Report) and Sweetgreen (SG - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Yum China, FIGS and Sweetgreen are set to report upcoming quarterly results on Nov. 3, Nov. 5 and Nov. 5, respectively.