Amazon Had Record Profits in Q3, but Its Cash Went Out the Door
Amazon's free cash flow was negative $42.4 billion in the third quarter of 2026, according to CNBC, which reported the results on October 29.
Free cash flow is the cash a company brings in from its business after paying for big purchases like equipment and buildings. When the number is negative, the company spent more on servers, buildings and other equipment than its operations brought in as cash.
The same quarter looked strong on the income statement. Amazon's third-quarter release reported operating income of $28.1 billion and an operating margin of 13.9%. The company said this was its highest operating margin ever.
Operating margin is the share of each sales dollar left after paying the cost of running the business, before interest and taxes. At 13.9%, that works out to about 14 cents of every dollar Amazon sold.
Amazon Web Services, the company's cloud computing business, drove much of the sales growth. The release reported AWS net sales up 39.3%. Reuters put AWS revenue at $46 billion for the quarter ended September, a 39% increase. Earnings per share, which is profit divided by the number of shares, came in at $1.89. The estimate was $1.96, according to CNBC.
The cash numbers tell a different story. Looking at the four most recent quarterly reports in order, free cash flow fell to $11.2 billion in the fourth-quarter results released February 5. It dropped to $1.2 billion in the first quarter, reported April 29. In the second quarter, reported July 30, it turned into an outflow of $7.6 billion. The third-quarter outflow of $42.4 billion is a sharp step beyond that trend.
Capital spending, the money a company puts into long-lived assets such as servers and buildings, explains much of the gap. Purchases of property and equipment were $50.7 billion in the fourth-quarter results, $59.3 billion in the first quarter and $66.1 billion in the second quarter. Each quarter was higher than the one before. CNBC reported that Amazon kept its 2026 spending forecast unchanged.
In my view, that unchanged forecast matters more than any single quarter's cash figure. A company that absorbs a $42.4 billion outflow and keeps its full-year spending plan intact is signaling that it is not slowing down to protect quarterly cash. Whether that is the right call depends on what the spending earns back.
Operating income is the best sign in the release that the existing business pays its way. But it is an accounting figure. It does not show how quickly the money already committed will turn into cash.
Andy Jassy has also set long-range goals. On October 30, GeekWire reported that Jassy said AWS and Amazon's stores business could each reach $1 trillion in annual revenue within the next five to 10 years.
Still, a goal ten years away is an aspiration, not a forecast of profit or cash. It says little about when this year's spending will pay back. A more useful comparison is between how fast AWS sales are growing and how much cash the segment's spending requires.
The next few reports should show whether operating income keeps pace with all that spending. Right now, Amazon shows strong profit at the operating level, negative free cash flow, and a spending plan that has not been cut. Those three facts sit together uneasily. The coming quarters should show which one changes first.
