Amazon (AMZN.US) Q3 revenue increased 12% year over year, AWS revenue surged 39%, free cash flow turned negative

The Zhitong Finance App learned that Amazon (AMZN.US) announced financial results for the third quarter of 2026 on Thursday. According to the data, the company's net revenue for the quarter reached US$2019.44 billion, up 12% from US$180,169 billion; operating profit reached US$28.076 billion, up about 61% from US$17.422 billion in the same period last year; GAAP net profit was US$20.685 billion, down about 2% from US$21.187 billion in the same period last year; and diluted earnings per share were US$1.89, down from US$1.95 in the same period last year.

Amazon's third-quarter operating margin reached 13.9%, up from 9.7% in the same period last year, and a record high for the company. The company said that after excluding the negative impact of about US$900 million due to exchange rate changes, revenue for the third quarter increased 13% year over year.

Notably, since this year's Prime Day promotions were held in most major markets ahead of schedule to the second quarter, while last year all of the events took place in the third quarter, interquarter comparability was affected. Amazon said that if this time adjustment factor is excluded, the year-on-year revenue growth rate for the third quarter will be about 4 percentage points higher than the reported growth rate.

AWS revenue grew 39%, the fastest growth rate in nearly five years

The cloud computing business became Amazon's most prominent performance highlight in the third quarter. According to financial reports, the third quarter revenue of the Amazon Cloud Services division of AWS reached US$45.984 billion, an increase of about 39% over US$33.06 billion in the same period last year, the fastest year-on-year growth rate in the past five years, and the annualized revenue operating scale reached about US$184 billion.

At the same time, AWS's operating profit reached 17.773 billion US dollars, up about 55% from 11.434 billion US dollars in the same period last year; operating profit margin increased to 38.7% from 34.6% in the same period last year.

Looking at quarterly trends, the year-on-year growth rate of AWS revenue continued to accelerate, rising from 20% in the third quarter of 2025 to 24% in the fourth quarter of 2025, then reaching 28% and 37% in the first and second quarters of 2026, respectively, and further rising to 39% in the third quarter.

Amazon CEO Andy Jassy said the company's investments in AWS functionality and infrastructure are paying off. Management expects AWS revenue to grow by more than 40% year over year in both 2027 and 2028.

Jassy pointed out that AWS' revenue in the third quarter increased by more than 39% year-on-year, reflecting the company's strategy of continuing to increase investment in cloud computing infrastructure and product features driving business growth.

Strong demand for corporate AI, Bedrock Token usage increased nearly 17 times year over year

In terms of artificial intelligence business, Amazon said that AWS recently signed new cooperation agreements with companies such as Meta, Nvidia, OpenAI, Salesforce, Oracle, Qualcomm, and Verizon. Among them, Amazon Bedrock, a generative AI service owned by AWS, continues to grow rapidly.

Financial reports show that Fortune 500 companies' spending on Bedrock increased nearly 7 times year over year, and the total amount of tokens processed by the Bedrock platform increased nearly 17 times year over year, reflecting the continued expansion of companies' demand for generative AI inference services.

In addition, Amazon continues to expand the AI models supported by Bedrock and launched a number of services related to AI agents. The company said tens of thousands of customers are currently using Amazon Bedrock AgentCore. In the third quarter, the number of AI agents deployed by customers doubled the total number of the previous three quarters.

In terms of AI infrastructure, Amazon continues to promote the application of Trainium, a self-developed AI accelerator, and launched the TorchNeuron tool to enable developers to migrate related workloads to Trainium without rewriting existing PyTorch code.

North American retail business profit surged 82%, international business profit improved

In addition to the cloud computing business, the profitability of Amazon's retail business has also improved markedly. In the third quarter, Amazon's North American business revenue reached US$112.852 billion, up 6% year on year; operating profit reached US$8.723 billion, up about 82% from US$4.789 billion in the same period last year; operating profit margin rose from 4.5% to 7.7%.

International business revenue was US$43.108 billion, up 5% year on year, up 8% after excluding exchange rate effects; operating profit was US$1,580 billion, up about 32% from US$1,199 billion in the same period last year.

Amazon said that richer product selection and faster delivery speed are helping the company expand its retail market share while improving profit margins. In the third quarter, Amazon Prime members enjoyed the fastest third-quarter delivery speed in the company's history, with over 1.5 billion items delivered same day or next day. The company continues to expand Amazon Now's ultra-fast delivery service. Currently, it has covered more than 450 towns and cities around the world, and the number of related orders has increased tenfold over the same period last year.

Ad revenue increased 11% Subscription service revenue increased 11%

Looking at specific business revenue, Amazon's online store revenue for the third quarter was 68.47 billion US dollars, up 2% year on year; physical store revenue was 5.710 billion US dollars, up 2% year on year. Third-party seller service revenue reached $46.492 billion, up 9% year over year. Revenue from advertising services was US$19.637 billion, up 11% year over year, and 12% after excluding exchange rate effects.

Amazon said that the growth rate of advertising revenue in the third quarter was affected by Prime members' daily promotion schedule adjustments and other time factors, and the year-on-year advertising revenue growth rate in the fourth quarter is expected to return to a high double digit level of close to 20%.

In addition, revenue from subscription services reached US$14.06 billion, up 11% year over year; revenue from other businesses was US$1,645 million, up 16% year over year.

Net profit fell 2% mainly due to Anthropic's investment income in the same period last year

Notably, although Amazon's third-quarter operating profit increased 61% year over year, net profit declined slightly. According to financial reports, the company's net profit for the third quarter was US$20.685 billion, down about 2% from US$21.187 billion in the same period last year.

Amazon clearly stated that the year-on-year decline in net profit was mainly due to the confirmation of about US$9.5 billion of pre-tax income related to Anthropic investments in the third quarter of 2025, which raised the comparative base for the same period last year.

Judging from the financial statements, Amazon recorded a loss of US$703 million in other net revenue and expenditure items in the third quarter, compared with revenue of US$10.186 billion for the same period last year. Therefore, although the operating profit of the company's core business increased significantly, the year-on-year change in profit and loss from non-operating investments had a clear impact on the final net profit.

AI capital expenditure surged, free cash flow turned negative in the past 12 months

In terms of cash flow, Amazon's operating cash flow in the third quarter reached US$42,422 billion, an increase of about 19% over US$35.525 billion in the same period last year.

At the same time, the company continues to significantly increase infrastructure investment. In the third quarter, Amazon's cash expenses for property and equipment purchases reached US$77.259 billion, an increase of about 120% over US$35.095 billion in the same period last year.

Based on the free cash flow disclosed by the company, that is, the cash flow from operating activities minus net cash expenses for the purchase of property and equipment, the free cash flow for the third quarter was negative about US$33.456 billion.

Looking at the past 12 months, Amazon's operating cash flow reached US$168.3 billion, an increase of 29% over the previous year.

However, due to the sharp increase in capital expenditure, the company's free cash flow over the past 12 months changed from positive US$14.788 billion in the same period last year to negative US$42.357 billion.

Amazon pointed out that the decline in free cash flow is mainly due to a year-on-year increase of 94.8 billion US dollars in net cash expenses for property and equipment purchases over the past 12 months, and this increase mainly reflects the company's investment in the field of artificial intelligence. Looking ahead to the full year, Amazon maintains its forecast for cash capital expenditure of approximately US$220 billion in 2026.

Fourth-quarter revenue is expected to reach a maximum of $247 billion

Looking ahead to the fourth quarter of 2026, Amazon expects net revenue to be between $240 billion and $247 billion, up 12% to 16% year over year. The company said that the above revenue guidelines are expected to include an adverse exchange rate impact of about 0.6 percentage points.

In terms of profitability, Amazon expects operating profit for the fourth quarter to be between US$28.5 billion and US$33.5 billion, up from US$25 billion in the same period last year. According to the guideline's median calculation, the company expects fourth-quarter revenue of approximately US$243.5 billion and operating profit of approximately US$31 billion.

Amazon said that future performance may still be affected by factors such as changes in the global economic environment, exchange rates, energy prices, trade policies, supply chains, and customer demand. Jassy pointed out that as the AWS cloud computing and artificial intelligence business continues to expand, and the profit margin of the retail business continues to improve, the company is seizing long-term growth opportunities in various business areas.