Amazon reported third-quarter results on 29 October that showed the strongest growth in its cloud business in almost five years, alongside a heavy bill for the artificial-intelligence build-out. According to the company’s filing with the US Securities and Exchange Commission, net sales rose 12% to $201.9 billion, and operating income reached $28.1 billion, compared with $17.4 billion a year earlier. Operating margin was 13.9%, which Amazon described as its highest ever. Amazon Web Services sales rose 39% to $46.0 billion, and the company put the unit’s annualised revenue run rate at $184 billion.
The argument that the strategy is working rests on the cloud numbers. AWS operating income rose to $17.8 billion from $11.4 billion a year earlier, and the company said AWS growth was its fastest in nearly five years, at 39.3%. Chief executive Andy Jassy said the investment “is working” and projected AWS growth of over 40% in both 2027 and 2028. Amazon said Fortune 500 customers spent nearly seven times more on its Bedrock AI service than a year before, and that tens of thousands of customers now use AgentCore, its platform for building AI agents. Since its last report, Amazon said it signed new AWS agreements with Meta, NVIDIA, OpenAI, Salesforce, Oracle and NATO, among others. For the fourth quarter, Amazon guided to net sales of $240 billion to $247 billion, growth of 12% to 16%, and operating income of $28.5 billion to $33.5 billion, against $25.0 billion in the same quarter last year.
The argument against begins with the cost. Over the 12 months to 30 September, free cash flow turned into an outflow of $42.4 billion, compared with an inflow of $14.8 billion a year earlier, because spending on property and equipment rose by $94.8 billion, mainly for AI. Amazon expects 2026 cash capital spending of about $220 billion. Net income fell to $20.7 billion, or $1.89 a share, from $21.2 billion, or $1.95, although Amazon said the decline reflected $9.5 billion of pre-tax gains from its Anthropic investments in the third quarter of 2025. Retail growth was also more modest than the headline. North America sales rose 6% to $112.9 billion and international sales rose 5% to $43.1 billion. The company said the shift in Prime Day into the second quarter held back third-quarter growth by about 400 basis points.
The results matter because Amazon expects about $220 billion of capital spending this year, a scale that sets the pace for chip suppliers, utilities and rivals alike. The three operating segments all improved, with North America operating income of $8.7 billion against $4.8 billion and international operating income of $1.6 billion against $1.2 billion a year earlier. Operating cash flow grew 29% to $168.3 billion over the 12 months, which shows the business can fund much of the build-out, but the swing to negative free cash flow shows how heavily the company is betting that demand will keep up.
Amazon’s quarter shows both sides of the AI boom at once: faster growth and record margins on the income statement, and a very large cash outlay on the balance sheet. The next few quarters will show whether AWS can grow as fast as Jassy predicts.
