AWS Grows 39% but Amazon Stock Falls as Earnings and Revenue Miss Wall Street Targets

Quick Facts

• Amazon reported Q3 2026 EPS of $1.89, missing the $1.97 consensus, on revenue of $201.94 billion, below the $202.22 billion estimate.
• AWS revenue hit $45.98 billion, up 39% year over year, marking the sixth consecutive quarter of accelerating growth and the highest rate since Q4 2021.
• Amazon posted negative free cash flow of $42.4 billion for the trailing twelve-month period, a swing of 386% year over year.

Amazon delivered a rare double miss on October 29, with both earnings and revenue falling short of Wall Street expectations despite its cloud division posting its fastest growth in nearly five years. Shares fell 7.30% to $225.99 in premarket trading Friday, part of a broader tech sell-off that also sent Google down 12%.

The company reported earnings per share of $1.89 against a consensus estimate of $1.97. Revenue came in at $201.94 billion, missing the $202.22 billion target by roughly $278 million.

AWS Carries the Quarter

Amazon Web Services was the standout. AWS revenue reached $45.98 billion, up 39.3% year over year and above the $45.29 billion analyst consensus. The division now operates at an annualized revenue run rate of approximately $184 billion.

AWS operating income rose 55% to $17.8 billion, up from $11.4 billion a year earlier. The cloud unit accounts for less than 23% of Amazon's total revenue but generated roughly 63% of its operating income.

During the quarter, AWS signed deals with Meta and OpenAI, acquired data analysis startup DuckLabs, and announced plans to expand its portfolio of Nvidia GPUs for AI workloads. Amazon Bedrock, the company's inference service, saw Fortune 500 spending grow nearly 7x year over year, with total token volume up nearly 17x. Tens of thousands of customers now use AgentCore, and agent deployments in Q3 doubled the combined total of the prior three quarters.

CEO Andy Jassy said on the earnings call that inference already accounts for well over half of AWS's AI revenue. He also stated that AWS is installing an AI accelerator approximately every 14 seconds.

Retail and Advertising Disappoint

Amazon's retail business dragged on results. Online store sales rose only 2% year over year to $68.47 billion, missing analyst projections of $69.68 billion and slowing sharply from the nearly 10% growth posted a year ago.

Advertising revenue grew 11% to $19.64 billion, short of the $20.82 billion consensus. Amazon attributed both misses in part to its decision to move the annual Prime Day sale forward into the second quarter in several markets to avoid overlap with the FIFA World Cup in July. The company said third-quarter net sales growth would have been about 400 basis points higher excluding that timing shift. Jassy also noted the absence of NBA games in the quarter, with the 2026-27 season opening October 23.

Record Margins, Negative Cash Flow

Operating income surged 61% to $28.1 billion, and operating margin reached 13.9%, the highest in Amazon's history. Net income came in at $20.7 billion, down slightly from $21.2 billion a year ago, when results included a $9.5 billion pre-tax gain from the Anthropic investment.

Free cash flow turned sharply negative, recording an outflow of $42.4 billion for the trailing twelve-month period, a 386% swing year over year. The prior quarter saw negative free cash flow of $7.6 billion. The deterioration reflects Amazon's aggressive capital spending on AI infrastructure.

Jassy confirmed the company expects 2026 capital expenditures of approximately $220 billion, the majority directed at AWS, with plans to spend more in 2027. He projected AWS revenue growth above 40% in both 2027 and 2028 and said AWS could reach $1 trillion in annual revenue within the next five to ten years.

What Comes Next

Amazon's fourth-quarter revenue guidance also landed below expectations, adding to investor concern. The company enters Q4 with NBA streaming inventory restored and Prime Day timing normalized, both of which Jassy cited as tailwinds.

The results land as cloud rivals also report accelerating growth, putting pressure on Amazon to defend its lead while absorbing the cash costs of building out AI capacity at scale.