Amazon’s (AMZN Quick QuoteAMZN - Free Report) aggressive artificial intelligence (AI) infrastructure buildout has pushed its free cash flow into negative territory. The company continues to expect 2026 cash capital expenditures of approximately $220 billion, indicating that cash flow pressure will persist through year-end.

For the trailing 12 months ended Sept. 30, 2026, Amazon reported a free cash outflow of $42.4 billion against an inflow of $14.8 billion a year ago. The swing was driven by a $94.8 billion year-over-year jump in purchases of property and equipment, net of proceeds and incentives, primarily reflecting AI investments. In the third quarter alone, capital spending of $77.3 billion far exceeded quarterly operating cash flow of $42.4 billion.

Still, the core business is generating cash faster. Trailing 12-month operating cash flow rose 29% to $168.3 billion, while third-quarter operating income climbed to $28.1 billion from $17.4 billion, translating into a record operating margin of 13.9%. AWS, the main beneficiary of this spending, grew sales 39% to $46 billion, its fastest pace in nearly five years, with an annualized revenue run rate of $184 billion. AWS operating income rose to $17.8 billion from $11.4 billion. Management projects AWS revenue growth of more than 40% in both 2027 and 2028.

For the fourth quarter of 2026, Amazon expects net sales of $240-$247 billion, implying 12-16% growth, and operating income of $28.5-$33.5 billion compared with $25 billion a year ago.

However, the buildout shows no sign of slowing. Amazon recently introduced Built Together, a $1 billion investment in U.S. data center communities, and in November detailed plans for a new state-of-the-art data center campus in Somervell County, Texas. Unless AWS monetization keeps pace with capacity additions, Amazon’s free cash flow recovery may take longer than investors hope.

How Amazon’s AI Spending Compares With Microsoft & Alphabet

Rivals Microsoft (MSFT Quick QuoteMSFT - Free Report) and Alphabet (GOOGL Quick QuoteGOOGL - Free Report) are also absorbing heavy AI capex, though with differing cash flow outcomes. In the first quarter of fiscal 2027, Microsoft generated $58 billion in operating cash flow against $39.4 billion of cash additions to property and equipment, and Microsoft expects to remain free cash flow positive through fiscal 2027. Alphabet, in contrast, reported negative free cash flow of $9.1 billion in the third quarter of 2026 as capital expenditures reached $51.4 billion. Alphabet maintained its 2026 capex outlook of $195-$205 billion and expects spending to increase significantly in 2027, pointing to sustained, sector-wide cash flow pressure.

AMZN’s Share Price Performance, Valuation & Estimates

Amazon shares have returned 15.5% in the year-to-date period, outperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 5.7% and 6.5%, respectively.

AMZN’s Year-to-Date Price Performance

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From a valuation standpoint, AMZN stock appears overvalued, trading at a forward 12-month price/earnings ratio of 24.51X, higher than the industry’s 20.84X. Amazon has a Value Score of D.

AMZN’s Valuation

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The Zacks Consensus Estimate for AMZN’s 2026 earnings is pegged at $12.90 per share, indicating an 79.92% increase from the figure reported in the year-ago quarter.

Amazon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.