Amazon Sales Miss Weighs on $220 Billion Capex Plan Despite AWS Growth

Operating income was $28.08 billion, ahead of the $26.06 billion estimate, and the operating margin was 13.9%, versus an expected 12.9%. AWS net sales were $45.98 billion, topping the $45.68 billion estimate, and grew 39% excluding currency effects versus an expected 38%. North America net sales were $112.85 billion, just below the $113 billion estimate, while Physical Stores were $5.71 billion, below the $5.77 billion estimate. AWS's annualized revenue run rate reached $184 billion, a measure that extends a recent revenue pace across a full year.

The cash picture was also under pressure. Amazon spent $77.26 billion on property and equipment in the quarter, and free cash flow was an outflow of $42.4 billion over the trailing 12 months. Free cash flow is the cash left after capital spending; here, the spending was large enough to leave negative cash flow despite positive operating income. Amazon still expects 2026 cash capex of about $220 billion, a commitment that will absorb cash as the company adds property and equipment.

The fourth-quarter outlook covers a range on both sides of estimates. Amazon guided net sales to $240.0 billion to $247.0 billion, bracketing the $244.52 billion estimate, and operating income to $28.5 billion to $33.5 billion, bracketing the $32.99 billion estimate. It expects fourth-quarter advertising revenue growth in the high teens year over year. The company also said it remains on track to begin initial Amazon Leo service in late 2026 and projected revenue growth rates above 40% in 2027 and 2028.

The split between the profit beat and the cash drain is the central tension. Large capital spending can depress free cash flow even when operating income is positive, so the fourth-quarter ranges do not settle the question. The capex plan would be easier to absorb if AWS growth stays near the reported pace and advertising grows in the high teens while spending stays near $220 billion; it would be harder to absorb if sales growth slows or free cash flow remains negative.