Amazon reported booming cloud revenue but otherwise missed expectations
The biggest ouch of the report was its negative free cash flow of $2.4 billion.
On Thursday, Amazon disclosed its third-quarter earnings, failing to meet analysts' forecasts for both overall revenue and earnings per share. The report was marred by other concerning figures, such as the rate at which the company is consuming cash. However, there was a significant positive aspect: Amazon Web Services, the company's cloud unit, exceeded revenue expectations and experienced a remarkable 39% growth compared to the previous year's quarter.
The most alarming revelation was that free cash flow plunged to a negative $42.4 billion over the past 12 months. This implies that Amazon was spending considerably more cash than it was generating, a stark contrast to the positive free cash flow of $14.8 billion for the same period that ended on September 30, 2025. The steep decline in free cash flow was primarily due to Amazon's substantial investments in artificial intelligence (AI).
With one quarter remaining in its fiscal year, Amazon reiterated its expectation to conclude 2026 with cash capital expenditures of approximately $220 billion. To contextualize this figure, the company forecasted fourth-quarter net sales to range between $240 billion and $247 billion. This means Amazon anticipates spending almost as much on capital expenditures, mainly for AI, throughout the entire year as it expects to generate from sales during the fourth quarter alone.
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