Amazon's Operating Margin Hits 13.9%, Its Highest Ever, As AWS Growth Accelerates To 39.3%
Amazon's cloud unit grew fastest in nearly five years, but a $220 billion spending plan left trailing free cash flow at negative $42.4 billion.
Amazon's third-quarter operating income jumped to $28.1 billion from $17.4 billion a year earlier, and its 13.9% operating margin is the highest in the company's history, it said Thursday. AWS, its cloud unit, grew 39.3%, the fastest pace in nearly five years, while AI spending pushed trailing-twelve-month free cash flow to an outflow.
AWS Carries The Quarter
Net sales rose 12% to $201.9 billion, against $180.2 billion a year earlier. Amazon said growth would have been roughly 400 basis points (four percentage points) higher without Prime Day moving into the second quarter for most large countries; in 2025 it fell entirely in the third.
AWS sales reached $46.0 billion, with operating income of $17.8 billion versus $11.4 billion a year ago. The unit's annualized revenue run rate is $184 billion. CEO Andy Jassy said the investment "is working," and projected AWS growth rates of over 40% in both 2027 and 2028.
North America operating income was $8.7 billion, up from $4.8 billion, on sales up 6% to $112.9 billion. International earned $1.6 billion versus $1.2 billion, on sales up 5% to $43.1 billion.
Net income slipped to $20.7 billion, or $1.89 per diluted share, from $21.2 billion, or $1.95. Amazon said the prior-year quarter included $9.5 billion of pre-tax gains from its Anthropic investments.
Cash Flow Turns Negative
Amazon, which runs online and physical stores, the Prime subscription, an advertising business and the AWS cloud, is spending heavily on AI. Trailing-twelve-month operating cash flow rose 29% to $168.3 billion, but purchases of property and equipment, net of proceeds, rose $94.8 billion over the year. Free cash flow was an outflow of $42.4 billion, versus an inflow of $14.8 billion a year earlier.
The balance sheet shows long-term debt of $173.1 billion at September 30, up from $65.6 billion at year-end 2025.
Fourth-Quarter Guidance
Amazon guided to fourth-quarter net sales of $240.0 billion to $247.0 billion, or growth of 12% to 16%, and operating income of $28.5 billion to $33.5 billion, compared with $25.0 billion in the fourth quarter of 2025. It still expects 2026 cash capital spending of about $220 billion.
The company also expects advertising revenue to grow in the high teens in the fourth quarter, after 12% growth excluding currency effects in the third, which it said was distorted by Prime Day timing.
Amazon scheduled its earnings call for 5:00 p.m. ET Thursday.
Sources
- 8-K Filing — AMAZON COM INC (AMZN) — SEC EDGAR
- Exhibit amzn-20260930xex991.htm — AMAZON COM INC 8-K exhibit — SEC EDGAR
- Exhibit amzn-20260930xex992.htm — AMAZON COM INC 8-K exhibit — SEC EDGAR
- Amazon.com, Inc. - Amazon.com Announces Third Quarter Results — ir.aboutamazon.com
