Amazon Q3 Operating Income Rises 61% to $28.1bn as AWS Sales Grow 39%
Amazon’s operating income rose 61% to $28.1bn in the third quarter, at what the company called its highest operating margin ever, as growth at its AWS cloud unit accelerated.
For Amazon shareholders, the quarter shows operating profit rising in both cloud and retail while capital spending, which Amazon says is going mainly into artificial intelligence, grows far faster. Purchases of property and equipment more than doubled to $77.3bn in the quarter. In The Edge’s reading, AWS growth gives that build-out its commercial case, but Amazon does not say how much of the spending goes to AWS, and the cash cost is arriving well before the returns.
Net income slipped 2% to $20.7bn. Amazon attributes the decline mainly to $9.5bn of pre-tax gains on its investments in Anthropic that lifted the year-earlier quarter.
The results come from the earnings release Amazon filed with a Form 8-K to the US Securities and Exchange Commission on 29 October, accepted at 20:05 GMT. The quarter ended on 30 September.
AWS earns 63% of operating income as its margin widens
AWS sales rose 39% to $46.0bn. Amazon called it the unit’s fastest growth in nearly 5 years, putting its annualised revenue run rate at $184bn.
The unit’s operating income rose 55% to $17.8bn. Its margin widened to 38.7% from 34.6% a year earlier. It eased, however, from 39.4% in the second quarter.
AWS earned 63% of group operating income from 23% of net sales. It also supplied 59.5% of the $10.7bn rise in group operating income, with North America providing most of the rest.
Andy Jassy, the chief executive, said Amazon projects AWS revenue growth of more than 40% in both 2027 and 2028. New AWS agreements signed since the previous quarterly report include Meta, NVIDIA, OpenAI, Salesforce and Oracle.
Segment results, third quarter (in $ millions)
| Segment | Q3 2025 | Q3 2026 | Change |
|---|---|---|---|
| North America sales | 106,267 | 112,852 | 6.2% |
| North America operating income | 4,789 | 8,723 | 82.1% |
| Overseas sales | 40,896 | 43,108 | 5.4% |
| Overseas operating income | 1,199 | 1,580 | 31.8% |
| AWS sales | 33,006 | 45,984 | 39.3% |
| AWS operating income | 11,434 | 17,773 | 55.4% |
Quarter to 30 September. Changes are calculated from the reported figures. Overseas is the segment Amazon reports as International.
Retail margins widen as the Prime Day shift slows sales growth
Group net sales rose 12% to $201.9bn. The group operating margin widened to 13.9% from 9.7%.
Prime Day fell in the second quarter in most large countries this year; in 2025 it fell entirely in the third. Amazon puts the shift’s cost to third-quarter growth at an estimated 400 basis points.
North America sales grew 6%. Segment operating income rose 82% to $8.7bn. The segment margin widened to 7.7% from 4.5%.
That margin was below the 7.9% of the second quarter, and the year-earlier base flatters the comparison. Other operating expense, which the release does not break down, fell to $0.1bn from $2.9bn. The 4.5% North America margin a year earlier was the lowest of the 6 quarters Amazon lists.
International sales grew 5%, or 8% excluding currency movements. Segment operating income rose 32% to $1.6bn. Currency changes cut group net sales by $0.9bn in the quarter.
Advertising revenue grew 12% excluding currency, down from 26% in the second quarter. Amazon cites timing effects linked mainly to Prime Day. The company expects advertising growth in the high teens in the fourth quarter.
Online store sales rose 2% and third-party seller services, which include seller commissions and fulfilment fees, grew 9%, both well below their second-quarter pace. Subscription services rose 11%.
Third-quarter results (in $ millions)
| Line | Q3 2025 | Q3 2026 | Change |
|---|---|---|---|
| Net sales | 180,169 | 201,944 | 12.1% |
| Operating expenses | 162,747 | 173,868 | 6.8% |
| Operating income | 17,422 | 28,076 | 61.2% |
| Non-operating income (expense) | 10,748 | -1,207 | n.m. |
| Pre-tax income | 28,170 | 26,869 | -4.6% |
| Net income | 21,187 | 20,685 | -2.4% |
Quarter to 30 September; n.m. means not meaningful.
Capital spending more than doubles and the free cash outflow deepens
Purchases of property and equipment reached $77.3bn in the quarter, 2.2 times the year-earlier level. That exceeded the quarter’s operating cash flow by $34.8bn.
Over the 12 months to September, free cash flow was an outflow of $42.4bn, against an outflow of $7.6bn in the 12 months to June. A year earlier it was an inflow of $14.8bn.
Amazon ties the swing mainly to a $94.8bn rise in net purchases of property and equipment, which it says primarily reflects investment in artificial intelligence. Operating cash flow still grew 29% over the same period, to $168.3bn.
The spending is so far lifting depreciation more slowly than operating income. Depreciation and amortisation rose 25% to $20.9bn, less than half the pace of operating income growth.
Borrowing has funded part of the gap. Long-term debt rose to $173.1bn at 30 September from $65.6bn at the end of 2025. Quarterly interest expense more than tripled to $1.7bn.
Cash, cash equivalents and marketable securities totalled $114.2bn, against $123.0bn at the end of 2025. Total assets rose 52% to $1,243.4bn.
Cash flow and balance sheet (in $ billions)
| Item | Prior | Latest | Change |
|---|---|---|---|
| Operating cash flow, Q3 | 35.5 | 42.4 | 19.4% |
| Purchases of property and equipment, Q3 | 35.1 | 77.3 | 120.1% |
| Free cash flow, 12 months | 14.8 | -42.4 | n.m. |
| Long-term debt | 65.6 | 173.1 | 163.7% |
| Total assets | 818.0 | 1,243.4 | 52.0% |
| Total equity | 411.1 | 613.6 | 49.3% |
Cash flow lines compare the quarter or the 12 months to 30 September 2025 and 2026; balance sheet lines compare 31 December 2025 with 30 September 2026. Free cash flow is operating cash flow less purchases of property and equipment net of proceeds from sales and incentives, as the company defines it. Figures are rounded to one decimal from the release’s $ millions; changes are calculated from the unrounded figures.
Other income doubles nine-month profit, and guidance points higher
For the 9 months to September, net income doubled to $113.6bn, even though the third quarter alone fell 2%. Most of the gain came below the operating line: other income reached $68.4bn, against $14.1bn a year earlier.
The release does not itemise the 2026 other income. Operating income rose 44% to $79.4bn over the same period.
Other assets on the balance sheet nearly tripled to $358.8bn over the 9 months, and Amazon does not break them down either. Unrealised gains on available-for-sale debt securities added $36.0bn after tax in the third quarter alone, outside net income.
Nine months to 30 September (in $ millions)
| Line | 2025 | 2026 | Change |
|---|---|---|---|
| Net sales | 503,538 | 584,069 | 16.0% |
| Operating income | 54,998 | 79,389 | 44.3% |
| Other income (expense), net | 14,052 | 68,359 | 386.5% |
| Net income | 56,478 | 113,587 | 101.1% |
Changes are calculated from the reported figures.
Amazon expects fourth-quarter net sales of $240.0bn to $247.0bn. That would be growth of 12% to 16% on a year earlier. The range includes an unfavourable currency effect the company puts at an estimated 60 basis points.
It expects fourth-quarter operating income of $28.5bn to $33.5bn. That compares with $25.0bn a year earlier. The range implies growth of 14% to 34%.
The company still expects 2026 cash capital expenditure of an estimated $220bn. The guidance assumes no further acquisitions, restructurings or legal settlements, and no impact from energy derivative remeasurements.
Fourth-quarter guidance (in $ billions)
| Measure | Q4 2025 | Q4 2026 guidance |
|---|---|---|
| Net sales | 213.4 | 240.0 to 247.0 |
| Operating income | 25.0 | 28.5 to 33.5 |
Guidance as of 29 October 2026; Q4 2025 figures as reported.
Figures are from Amazon’s Form 8-K and earnings release filed with the US Securities and Exchange Commission on 29 October 2026; percentages, ratios and comparisons not attributed to the company are The Edge’s calculations.
Sources: Amazon, US Securities and Exchange Commission, The Edge.
