AWS Grows 39% to $45.98 Billion as Amazon's Cloud Hits a Five-Year High, but a $42.4 Billion Cash Outflow Sinks the Stock

Amazon posted third-quarter revenue of $201.94 billion on Thursday, up 12% year over year but narrowly missing Wall Street's $202.31 billion consensus, and earnings per share of $1.89 fell short of the $1.96 estimate. Net income slipped 2% to $20.69 billion, a decline the company attributed largely to the absence of last year's $9.5 billion pre-tax valuation gain on its stake in AI startup Anthropic. The stock, which had already closed down 4.3% at $243.79 before the report, dropped another 7% to 8% in after-hours trading.

The bright spot was AWS, which grew 39% year over year to $45.98 billion, beating the $45.29 billion estimate and marking the division's fastest growth rate in about five years. AWS operating income jumped 55% to $17.77 billion, and the segment's operating margin expanded even as the rest of the company absorbed the cost of an unprecedented buildout. CEO Andy Jassy said investments in AWS capabilities and infrastructure are "paying off," and projected that AWS revenue growth would exceed 40% next year and again in 2028.

Everything outside the cloud looked tired. Online stores revenue rose just 2% to $68.47 billion against a $69.68 billion estimate, and advertising grew 11% to $19.64 billion, well below the $20.82 billion consensus. Total operating income of $28.08 billion did beat estimates of around $26.06 billion, lifting the operating margin to 13.9%, but investors have stopped rewarding margin when the cash statement is bleeding.

And it is bleeding. Amazon's trailing-twelve-month free cash flow came in at negative $42.4 billion, a 386% deterioration from a year earlier and the second consecutive negative quarter, after a $7.6 billion outflow in the prior period. The company spent more than $77 billion on property and equipment in the quarter alone, driven by AI data center purchases, and reaffirmed its plan to hold full-year 2026 capital expenditures at $220 billion. That stance puts Amazon at the aggressive end of a hyperscaler spectrum where Microsoft has trimmed its capex outlook and Alphabet is holding to a $195-205 billion plan.

Guidance offered little reassurance. Amazon forecast fourth-quarter revenue of $240 billion to $247 billion, a range that brackets the $244.5 billion consensus, with operating income of $28.5 billion to $33.5 billion against estimates near $33 billion. The holiday quarter is typically Amazon's strongest, so a midpoint forecast that only matches expectations reads as a statement that retail growth is settling into a lower gear while every incremental dollar of capital flows to AI.

The quarter lands in a market that has started grading cloud earnings on a single question: what did the capex buy? This week Azure disclosed $33.2 billion in quarterly revenue and Google Cloud reported $30.7 billion, meaning AWS still leads the three on absolute size, but its 39% growth now trails Google Cloud's trajectory and its cash consumption dwarfs both. Investors sold first and asked questions later.

The deeper story is the gap between revenue recognition and cash reality. AWS is signing AI-era commitments faster than it can depreciate the servers behind them, and Amazon is betting that inference demand keeps compounding at 40% or better through 2028. If it does, the $42.4 billion outflow will look like the entry fee to the next decade of cloud. If it does not, Amazon will have spent the largest capital budget in corporate history chasing demand that arrived on someone else's terms.