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# AWS grows 39%, its fastest in nearly five years, but Amazon misses as AI spending drains cash
- URL: https://www.skimwire.com/amazon-q3-2026-earnings-aws-39-percent-free-cash-flow/
- Published: 2026-10-30T12:37:15.000Z
- Updated: 2026-10-30T12:37:15.000Z
- Description: Amazon missed on profit and sales, and free cash flow hit a $42.4B outflow. AWS sped up, and Jassy projects 40%+ growth in 2027 and 2028.
- Author: Jeremy Moon
- Tags: Business, AI

## The skim

- AWS grew 39% to $46 billion in the third quarter, its fastest growth in nearly five years. Andy Jassy says it can grow more than 40% in both 2027 and 2028.
- Amazon overall missed: $1.89 a share on $201.9 billion in sales, versus $1.96 and $202.31 billion expected, per LSEG. Ads and online stores also came in light.
- AI spending pushed free cash flow to an outflow of $42.4 billion over 12 months. Shares fell nearly 7% in premarket trading Friday, according to CNBC.

## What Amazon reported

Amazon Web Services brought in $45.98 billion in the quarter that ended Sept. 30, up 39.3% from a year earlier and ahead of the $45.29 billion analysts expected, according to [CNBC](https://www.cnbc.com/2026/10/29/aws-q3-earnings-report-2026.html?ref=skimwire.com). That's up from about 37% growth in the second quarter and the cloud unit's fastest pace since late 2021\. AWS operating income rose 55% to $17.8 billion, and Amazon put the business at a $184 billion annual revenue run rate.

The rest of the company was softer. Total sales rose 12% to $201.9 billion, and [Amazon says](https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Third-Quarter-Results/?ref=skimwire.com) growth would have been about four points higher if Prime Day hadn't moved into the second quarter this year. Ad revenue rose 11% to $19.64 billion, short of the $20.82 billion StreetAccount expected, and online store sales grew just 2%. Net income slipped to $20.7 billion from $21.2 billion, mostly because last year's quarter included a $9.5 billion gain on Amazon's Anthropic stake. Operating income still jumped to $28.1 billion, a record 13.9% margin.

## Why it matters

This is the third big cloud report in two days with the same shape: demand is accelerating, and so is the bill. Microsoft said Azure topped [$33 billion in a quarter](https://www.skimwire.com/microsoft-q1-fy27-earnings-azure-openai-revenue/), and Alphabet's cloud more than doubled even as its [stock sank on a rare miss](https://www.skimwire.com/alphabet-q3-2026-earnings-ai-mode-search-free-cash-flow/). Amazon is spending hardest. It still expects about $220 billion in capital spending this year, and Jassy said it will "spend meaningfully more in 2027." Trailing free cash flow swung from a $14.8 billion inflow a year ago to a $42.4 billion outflow.

Investors had hoped for more from AWS. Several analysts told clients the buy side was looking for growth in the low 40s, CNBC reported, which is why a 39% quarter still disappointed. Morgan Stanley's Brian Nowak called it "mostly an expectations miss."

## What's next

For the holiday quarter, Amazon guided to $240 billion to $247 billion in sales; the midpoint is below the $244.5 billion analysts expected, per LSEG. It expects operating income of $28.5 billion to $33.5 billion. Two longer bets stood out on the call: Jassy said Amazon will sell its Trainium AI chips outside AWS "late in 2027," taking a page from Google's TPU playbook, and he said AWS could be a trillion-dollar revenue business in five to 10 years.

*Sources:* [*Amazon*](https://ir.aboutamazon.com/news-release/news-release-details/2026/Amazon-com-Announces-Third-Quarter-Results/?ref=skimwire.com)*,* [*CNBC (results)*](https://www.cnbc.com/2026/10/29/amazon-amzn-q3-earnings-report-2026.html?ref=skimwire.com)*,* [*CNBC (AWS)*](https://www.cnbc.com/2026/10/29/aws-q3-earnings-report-2026.html?ref=skimwire.com) *and* [*CNBC (analysts)*](https://www.cnbc.com/2026/10/30/amazon-earnings-analysts-stock.html?ref=skimwire.com)*.*