Overview
Since the Report − 6.5%
Revenue grew 12.1% year over year, EPS missed the estimate by 3.6%; the stock fell 6.5% in its first reaction.
- RevenueQ3
- $201.94B
- ▲ 12.1% YoY · in Line
- EPSGAAP
- $1.89
- Estimate $1.96 · 3.6% Miss
Verdict
SELLAmazon's third-quarter revenue of $201.9 billion was in line with expectations, but EPS came in 3.6% below the estimate. AWS grew 39% year over year, yet trailing free cash flow turned negative at $42.4 billion and the stock fell 6.5% after hours. The measure to watch now is how fast AWS growth can cover the investment bill.
Close on Report DayOct 29
$243.79▼ 6.5%Report-Day Move
- Market Cap(Today)
- ≈ $2.46 T
- 1Y Return(At Report)
- + 6%
- P/E(At Today's Price · $12.37 · Trailing 12M)
- 18.4
- Net Margin(Trailing 12M)
- 17.4%
Earnings Summary
In 30 Seconds- Revenue of $201.94 billion was in line with expectations, while EPS of $1.89 came in 3.6% below the estimate.
- AWS grew 39% year over year, and the CEO projected growth above 40% for 2027 and 2028.
- The stock fell 6.5% after hours as trailing free cash flow turned negative at $42.4 billion.
The Numbers
AWS Revenue
$45.98B
▲ 39.3% YoY · Margin 38.7%
Operating Income
$28.08B
▲ 61% YoY · Margin 13.9%
Free Cash Flow (TTM)
−$42.4B
Year Ago +$14.8B
Stock Reaction
▼ 6.5%
After Hours, 5:17 P.m. ET · Not Settled
Quarterly Revenue ($ Billion)
180
Q3 25 · $180 B
213
Q4 25 · $213 B · QoQ + 18.4%
182
Q1 26 · $182 B · QoQ − 14.9%
201
Q2 26 · $201 B · QoQ + 10.5%
202
Q3 26 · $202 B · QoQ + 0.7% · YoY + 12.1%
240–247
Q4 26E · 240–247 · QoQ + 20.6% · YoY + 14.1%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
Q4 2026 Company Guidance
- Q4 Revenue240 – 247 billion240 billion247 billion
Midpoint 243.5 · Market Expectation 244.51In Line ✓
- Q4 Operating Income28.5 – 33.5 billion28.5 billion33.5 billion
Midpoint 31.0 · Year Ago 25.0. Earnings-call Details Will Be Added Tonight.24% YoY Increase ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±9.3% around the midpoint.
Segment and KPI Data
Revenue by Segment
- North America$113 BShare 55.9%▲ 6.2% YoY
- AWS$46.0 BShare 22.8%▲ 39.3% YoY
- International$43.1 BShare 21.3%▲ 5.4% YoY
Key Metrics
Operating Cash Flow (TTM)
$168 B
▲ 29.0% YoYPress Release
Purchases of Property and Equipment (Q3)
$77.3 B
Press Release
Advertising Revenue
$19.6 B
▲ 11.0% YoYPress Release
Subscription Revenue
$14.0 B
▲ 11.0% YoYPress Release
Headcount
1.64 M employees
Press Release
Shares are computed over the segment total: $202 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028. Our broader selection and speedier delivery are helping us capture more retail market segment share with improving margins, and our newer businesses, ranging from Grocery to Pharmacy to Amazon Leo to Zoox are progressing encouragingly. There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years.”
- AWS Growth Target Above 40%
- Improving Retail Margins
- Two Trillion-dollar Businesses
Summary and Review
Summary
Amazon's net sales rose 12.1% year over year to $201.94 billion. The market expected $202.31 billion, so the gap of 0.2% is in line. EPS came in at $1.89, 3.6% below the $1.96 estimate. The midpoint of fourth-quarter revenue guidance is $243.5 billion. That is 0.4% below the $244.51 billion estimate. The revenue and guidance gates are in line, while the earnings gate is closed.
The stock closed October 29 at $243.79, then fell 6.5% after hours as of 5:17 p.m. ET. The price has not settled yet; the loss deepened during the earnings call. The market did not read this report as a growth story; it read it as a cash story. Operating cash flow over the past 12 months was $168.3 billion. Purchases of property and equipment reached $215.2 billion over the same period. Free cash flow turned negative at $42.4 billion.
The score is 47 and the verdict is sell; it rates the quarter, not the stock. Operating income rose 61% year over year to $28.08 billion. The operating margin of 13.9% was the highest in the company's history. But on the decision table the earnings gate is closed, while revenue and guidance are only in line. Negative free cash flow and fast-rising debt pull the score lower within its band. Earnings-call details will be added tonight.
Full Review
AWS keeps up its growth.
AWS revenue rose 39.3% year over year to $45.98 billion. The company puts its annual revenue run rate at $184 billion. AWS's share of total sales rose from 18.3% a year ago to 22.8%. That means the company's most profitable segment is gaining weight in the mix. Segment operating income was $17.77 billion, a 38.7% margin. The margin narrowed 0.7 points from the prior quarter but widened 4.1 points from a year ago. In the release, CEO Andy Jassy said Amazon projects AWS revenue growth above 40% in both 2027 and 2028. Amazon normally gives guidance only one quarter ahead. According to the earnings call, the AWS backlog rose to $578 billion. It stood at $496 billion at the end of the second quarter, a 16.5% sequential increase.
Retail margins improved, growth stayed slow.
North America sales rose 6.2% year over year to $112.85 billion. International sales grew 5.4% to $43.11 billion, or 8% excluding currency effects. The release says the shift of Prime Day into the second quarter took about 4 points off total growth. Profitability looks stronger. North America operating income rose from $4.79 billion to $8.72 billion. The segment margin widened 3.2 points, from 4.5% to 7.7%. International operating income rose from $1.20 billion to $1.58 billion. Advertising revenue grew 11% to $19.64 billion. Subscription revenue also grew 11%, to $14.01 billion. These two lines show high-margin revenue growing alongside retail.
Why earnings fell.
Net income fell 2% year over year to $20.69 billion. EPS slipped from $1.95 to $1.89. Operating income rose 61%, so the decline came from non-operating items. In the third quarter of last year, Amazon booked $9.5 billion of pre-tax gains on its Anthropic investments. There was no such gain this quarter. Other income and expense swung from a $10.19 billion gain to a $0.70 billion loss. EPS over the last four quarters totals $12.37. That total includes large Anthropic gains in the first and second quarters. As a result, a trailing P/E ratio makes the stock look cheaper than it is. Readers should not rely on that ratio alone. The jump in operating income, by contrast, points to better earnings quality.
The investment bill keeps growing.
Purchases of property and equipment were $77.26 billion in the third quarter. The 12-month total was $215.19 billion. The company kept its target of about $220 billion in 2026 cash capital spending. On the call, it said 2027 spending will be meaningfully higher. Operating cash flow rose 29% to $168.3 billion, but it did not cover the spending. As a result, 12-month free cash flow turned negative at $42.4 billion. A year ago it was a positive $14.8 billion. Long-term debt rose from $65.6 billion at the start of the year to $173.1 billion. For the fourth quarter, Amazon expects revenue of $240-247 billion. Operating income guidance is $28.5-33.5 billion. The midpoint is 24% above the $25.0 billion of a year ago.
Next quarter, watch one line.
This quarter's story is whether spending turns into growth. Next quarter, watch one line: AWS's year-over-year growth. If growth climbs above 40%, Jassy's 2027 target is validated early. Negative free cash flow would then read as the price of investment. If growth drops below 35%, the investment bill is growing faster than revenue. In that case the record margin alone will not carry the stock. The second check is whether the free cash flow deficit narrows. For a general framework on reading earnings day, see our guide. What management says on the call about AWS capacity and the 2027 spending plan will be added tonight. The third check is whether fourth-quarter revenue lands in the upper half of the range; the $243.5 billion midpoint is slightly below the estimate.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- AWS revenue rose 39.3% year over year to $45.98 billion, with a $184 billion annual run rate.
- Operating income rose 61% to $28.08 billionThe 13.9% margin was the highest in company history.
- North America operating income rose from $4.79 billion to $8.72 billion.
- The CEO said in the release that Amazon projects AWS revenue growth above 40% in 2027 and 2028.
- The midpoint of fourth-quarter operating income guidance is 24% above the $25.0 billion of a year ago.
- The AWS backlog cited on the earnings call reached $578 billion, up from $496 billion at the end of the second quarter.
Risks
6- Trailing 12-month free cash flow turned negative at $42.4 billion, versus a positive $14.8 billion a year ago.
- EPS of $1.89 came in 3.6% below the $1.96 estimate.
- Long-term debt rose from $65.6 billion at the start of the year to $173.1 billion.
- AWS operating margin of 38.7% narrowed 0.7 points from the prior quarter.
- Trailing EPS includes Anthropic gains, so the P/E ratio makes the stock look cheaper than it is.
- The company said 2027 capital spending will be meaningfully higher than the roughly $220 billion planned for 2026.
What to Watch
2- Holiday season: the company plans to hire more than 300,000 seasonal workers.
- Q4 2026 earnings (~February 2027)Company revenue guidance is $240-247 billion.
Upcoming Earnings
To Understand This