Amazon Q3: AWS grows 39.3% for its fastest rate in nearly five years, quarterly equipment purchases hit $77.3B, free cash flow turns to a $42.4B outflow, and 2026 capex is confirmed at about $220B

Source. This article is based on the official release Amazon.com Announces Third Quarter Results, published on Amazon's investor relations site on October 29, 2026, with a PDF version alongside it, covering the three months ended September 30, 2026. Every figure below comes from that release and its cash flow statement and supplemental tables; ratios computed on top of it, and phrases such as a second consecutive quarter of negative free cash flow, are labelled with their source.

The top line. Net sales rose 12% to $201.9 billion from $180.2 billion, or 13% excluding foreign exchange. The release flags a timing caveat itself: Prime Day moved into the second quarter this year for most large countries, whereas in 2025 it fell entirely in the third quarter, and excluding that shift third quarter growth would have been roughly 400 basis points higher. By segment, North America grew 6% to $112.9 billion, International grew 5% to $43.1 billion (8% excluding FX), and AWS grew 39% to $46.0 billion.

Margin is the part most easily missed. Operating income was $28.1 billion against $17.4 billion, a 13.9% margin that the subtitle calls Amazon's highest operating margin ever. Split out: North America operating income of $8.7 billion versus $4.8 billion, International $1.6 billion versus $1.2 billion, AWS $17.8 billion versus $11.4 billion. AWS therefore produced about 63% of operating profit on 23% of revenue. Net income was $20.7 billion, or $1.89 per diluted share, below last year's $21.2 billion and $1.95, but the release attributes the decline primarily to $9.5 billion of pre-tax gains in the prior year quarter from investments in Anthropic that are absent this year, not to weaker operations.

The AWS paragraph deserves a word-by-word read. Jassy says the investment in AWS functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 at a $184 billion run rate, and projected revenue growth rates of over 40% in both 2027 and 2028. Put the three numbers together: $46 billion in the quarter, a $184 billion run rate, and a guide of above 40% growth for two more years. A business of that size guiding above 40% for two years is the most aggressive sentence in the release, and it is the premise for spending $220 billion.

The cash flow maths has to be walked through or the headline misleads. Trailing twelve month operating cash flow was $168.3 billion, up 29% from $130.7 billion. Free cash flow is operating cash flow minus net purchases of property and equipment, and it came to an outflow of $42.4 billion versus an inflow of $14.8 billion a year earlier. The release gives the reason plainly: purchases of property and equipment, net of proceeds from sales and incentives, rose $94.8 billion year over year, and that increase primarily reflects investments in artificial intelligence. A supplemental table makes it concrete: net equipment purchases over the trailing twelve months were $210.66 billion, up 82%.

The quarterly scale deserves its own line. In the cash flow statement, purchases of property and equipment in Q3 2026 were $77.259 billion against $35.095 billion a year earlier, a $42.164 billion increase, with $175.670 billion for the first nine months versus $92.297 billion. What does $77 billion of equipment and infrastructure in one quarter mean? It exceeds the quarter's AWS revenue of $46.0 billion, and it is more than seven times the combined operating income of the two retail segments, $8.7 billion plus $1.6 billion. That ratio says more about investment intensity than any adjective.

Fourth quarter guidance. Net sales are expected between $240.0 and $247.0 billion, growing 12% to 16%, with an anticipated FX headwind of about 60 basis points; operating income is expected between $28.5 and $33.5 billion against $25.0 billion a year earlier. The key sentence is that Amazon continues to expect 2026 cash capital expenditures of approximately $220 billion. Note the word continues: this is not an increase. In the same week Meta raised equity and Microsoft trimmed its guide, Amazon held its number rather than lifting it.

For people who work with data, the most consequential item may sit near the bottom: Amazon acquired DuckLabs, the company behind the open source analytics tool DuckDB. The stated purpose is concrete. With DuckDB, AWS customers will be able to write their SQL analytics query once and execute it using any AWS analytics service, which the release calls the first time in analytics that customers have zero migration or portability costs between query engines. What that really means is that the query engine contest shifts from which one you pick to whichever one, with DuckDB as the entry point to that abstraction.

The model and agent disclosures are unusually specific. On Bedrock, Fortune 500 spending grew nearly 7x year over year and total token volume grew nearly 17x, while the catalogue added OpenAI's GPT-6 Astra, GPT-6 Sol, GPT-6 Luna and GPT-6.1 Sol; Anthropic's Claude Fable 5.1, Opus 5.5, Sonnet 5.5 and Haiku 5.5; Moonshot's Kimi K3, SpaceXAI's Grok 4.7 and Z.ai's GLM 5.3; plus two purpose-built cybersecurity models from OpenAI. Built-in web search for OpenAI models launched, and Bedrock Managed Agents entered public preview. On the open source side Amazon released the Strands harness, which it says lowers agent task cost by 32% through greater token efficiency on the same frontier models at equal or better accuracy, and previewed the Strands Box sandbox for constraining agent behaviour.

One security and developer item is easy to skip but tells you about positioning: AWS made Continuum generally available, an AI-powered service that discovers, prioritises, validates and remediates software vulnerabilities at machine speed, and the integration list is the interesting part. Amazon says it is bringing Continuum into Anthropic's Claude Code, OpenAI's Codex and its own Kiro, meaning it is supplying a security layer to competitors' coding agents. Separately, Lambda topped a $1 billion annualised revenue run rate, and AgentCore customers deployed twice as many agents in Q3 as in the prior three quarters combined.

Put this release beside the rest of the week and the structure becomes visible. Meta launched a $35 billion equity raise in a single day and reserved a $60 billion at-the-market program; Microsoft cut its full-year capex estimate from $175 billion to $170 billion, citing partners that failed to deliver data centre capacity on time; SK hynix said more than half of its 2027 and 2028 capacity is locked under long-term contracts; Amazon held $220 billion and guided AWS growth above 40% for two years. Four numbers pointing at one conclusion: supply-side constraints in power, buildings and memory are tighter than demand, and cash is being pulled out of the most profitable segment and pushed back in.

Boundaries. First, part of the 39.3% AWS growth reflects capacity that had previously slipped, and the release does not split out how much is catch-up. Second, the negative free cash flow is attributed to AI investment, but equipment purchases also cover fulfilment, logistics and retail infrastructure, and no AI versus non-AI split is disclosed. Third, the above-40% growth for 2027 and 2028 is Jassy's projection, a forward-looking statement, and the release lists a long set of uncertainties in its guidance section including memory chip supply, FX, interest rates and demand. Fourth, phrasing such as a second consecutive quarter of negative free cash flow and a prior quarter of minus $7.6 billion comes from CNBC's coverage rather than the release's own text. Fifth, this article forecasts no share price and estimates no return on the $220 billion, because the release discloses neither.