Amazon Q3 2026: a 13.9% operating margin and AWS up 39%, as one quarter's capex reached $77.3B

Amazon runs three businesses that report as segments: North American and International retail (online stores, third-party seller services, advertising and subscriptions) and AWS, its cloud unit. AWS brings in under a quarter of sales but most of the profit, and it took $57,116 million of the quarter’s $78,262 million of net additions to property and equipment, about 73% (our arithmetic, from the 10-Q’s segment table). The release says the year-over-year increase in net purchases of property and equipment “primarily reflects investments in artificial intelligence.”

In Q2, net income of $62.6 billion included large Anthropic gains. This quarter’s net income contains no gain of that size, and the operating picture is clearer: all three segments earned higher margins than a year earlier. The cash-flow statement tells a different story. Purchases of property and equipment ran to about 1.8 times the quarter’s operating cash flow (our arithmetic), and Amazon raised long-term debt to close the gap. The sections below take the two statements in turn.

Amazon Q3 2026 results at a glance

$ millions, except per share	Q3 2026	Q2 2026	Q3 2025
Net sales	201,944	200,606	180,169
North America	112,852	116,177	106,267
International	43,108	42,197	40,896
AWS	45,984	42,232	33,006
Operating income	28,076	27,461	17,422
Operating margin	13.9%	13.7%	9.7%
Net income	20,685	62,647	21,187
Diluted EPS	$1.89	$5.75	$1.95
Operating cash flow	42,422	45,387	35,525
Purchases of property and equipment	77,259	54,208	35,095

The release attributes part of the slower sales growth to Prime Day: in 2025 the event fell entirely in Q3, while in 2026 it ran in Q2 for most large countries. It says that excluding this shift, third-quarter growth “would have been approximately 400 basis points higher.” Excluding foreign exchange, sales grew 13%.

How did Q3 compare with Amazon’s guidance?

The Q2 release (Form 8-K, July 30) guided Q3 net sales to $197.0 billion to $202.0 billion and operating income to $22.5 billion to $26.5 billion. Net sales of $201.9 billion came in inside that range, about $56 million below its top (our arithmetic). Operating income of $28.1 billion was about $1.6 billion above the top of its range (our arithmetic).

So the sales line was as guided and the profit line was not. The supplemental table shows where the margin came from: operating margin was 13.9%, against 13.7% in Q2 and 9.7% a year earlier. The release calls it “Amazon’s highest operating margin ever.”

All three segments widened their margins from a year earlier

Operating margin	Q3 2026	Q2 2026	Q3 2025
North America	7.7%	7.9%	4.5%
International	3.7%	4.1%	2.9%
AWS	38.7%	39.4%	34.6%

North America’s operating income rose to $8,723 million from $4,789 million, on sales growth of only 6%. Part of that comparison is the year-ago base: the year-ago quarter’s other operating expense was $2,875 million, against $134 million this quarter, and the release does not say how that line splits by segment. International operating income rose to $1,580 million from $1,199 million.

AWS earned $17,773 million, about 63% of company operating income, against about 66% a year earlier (our arithmetic). Retail’s share rose because North America and International operating income together grew about 72%, against about 55% for AWS (our arithmetic). AWS’s own margin slipped from Q2’s 39.4% to 38.7%. Depreciation and amortization across the company was $20,949 million, about 25% more than a year earlier (our arithmetic on the cash-flow line).

AWS grew 39% with $578B of contracted commitments

AWS net sales grew 39% to $45,984 million, from 37% in Q2 and 20% a year earlier. The release says that is its fastest growth in nearly five years and puts the annualized revenue run rate at $184 billion. CEO Andy Jassy says in the release that Amazon projects AWS revenue growth “of over 40% both in 2027 and in 2028.” That is a statement in the release, not quarterly guidance, and this piece does not test it.

The 10-Q gives the contract base behind the projection. Commitments in customer contracts with original terms over one year that Amazon has not yet recognized, “primarily related to AWS,” were approximately $578 billion at September 30, against approximately $496 billion at June 30, an increase of about $82 billion, or about 17%, in one quarter (our arithmetic). The weighted-average remaining life of those contracts is 6.1 years. The 10-Q also records two expansions announced earlier in the year: AWS’s commitment with OpenAI grew by $100.0 billion over 8.0 years in Q1 2026, and its commitment with Anthropic by more than $100.0 billion over 10.0 years in Q2.

Why did EPS fall while operating income rose 61%?

Non-operating items reversed. A year ago, other income was $10,186 million. The release says the decline in net income is “driven primarily by pre-tax gains of $9.5 billion in third quarter 2025 included in non-operating income (expense) from our investments in Anthropic.” This quarter, other income was a $703 million expense, and interest expense rose to $1,691 million from $538 million, while long-term debt grew. Total non-operating income swung from $10,748 million to a $1,207 million expense.

Pre-tax income therefore fell to $26,869 million from $28,170 million, and net income to $20,685 million from $21,187 million, even though operating income was $10.7 billion higher (our arithmetic). Diluted EPS was $1.89 against $1.95. The Anthropic stake still matters on the balance sheet: the 10-Q puts Amazon’s convertible notes in Anthropic at an estimated fair value of about $146.2 billion and its Anthropic nonvoting preferred stock at about $92.5 billion. Q3 other income contained no gain of the size booked a year earlier; the 10-Q puts nine-month upward adjustments to the preferred stock at $62.8 billion, recognized in earlier 2026 quarters.

$77.3B of capex and a $48.1B bond raise

$ millions	Q3 2026	Q2 2026	Q3 2025
Operating cash flow	42,422	45,387	35,525
Purchases of property and equipment	(77,259)	(54,208)	(35,095)
Proceeds from sales and incentives	1,381	1,132	867
Free cash flow (our arithmetic)	≈−33,456	≈−7,689	≈1,297

Free cash flow here uses Amazon’s own definition (operating cash flow less purchases of property and equipment, net of proceeds and incentives), applied to single quarters. The release reports it only on a trailing-twelve-month basis: an outflow of $42.4 billion, against an inflow of $14.8 billion a year earlier. The release attributes the swing primarily to a $94.8 billion year-over-year increase in net purchases of property and equipment.

Q3 purchases of $77,259 million exceeded the whole first half of 2025, when Amazon spent $57,202 million (our arithmetic: nine-month 2025 purchases of $92,297 million less Q3 2025’s $35,095 million). They were about 120% above a year earlier and about 43% above Q2 (our arithmetic), and equal to about 38% of net sales. Amazon “continue[s] to expect 2026 cash capital expenditures to be approximately $220 billion.” Nine-month net purchases were $172.2 billion (our arithmetic: $175,670 million less $3,482 million of proceeds), which would leave roughly $48 billion for Q4 if the estimate holds and the release’s term matches the net purchases line (our arithmetic; the release does not reconcile the two).

Investments added to the outflow. The “acquisitions, non-marketable investments, and other” line was $23,986 million in the quarter, and the 10-Q says $21.3 billion of it was invested in OpenAI’s Series C preferred stock ($50.0 billion for the nine months). Amazon funded the gap with debt: proceeds from long-term debt were $48,102 million in Q3, and long-term debt reached $173,125 million at September 30, against $65,648 million at December 31, 2025. Cash and marketable securities together were $114.2 billion (our arithmetic: $55,783 million plus $58,443 million).

What to watch in Q4

• The guidance. Net sales of $240.0 billion to $247.0 billion (12% to 16% growth) and operating income of $28.5 billion to $33.5 billion, against $25.0 billion in Q4 2025.
• Advertising. The release expects year-over-year advertising growth “in the high teens” in Q4, after 12% excluding foreign exchange in Q3, which it says was affected by Prime Day timing.
• The $220 billion capex estimate. It leaves roughly $48 billion for Q4 on our arithmetic, well below Q3’s $77.3 billion, though the release does not reconcile its term to the cash-flow line. Any revision shows up in the next release.
• AWS margin. It slipped from 39.4% in Q2 to 38.7%. Whether it holds as more of the new capacity enters service is the test of the spending.
• The backlog. $578 billion of commitments grew $82 billion in one quarter. The Q4 10-K will show the next figure.

Quick answers

What were Amazon’s Q3 2026 earnings?

Net income was $20,685 million, or $1.89 per diluted share, against $21,187 million ($1.95) a year earlier. Operating income rose to $28,076 million from $17,422 million; the decline in net income came from $9.5 billion of pre-tax Anthropic gains in the year-ago quarter.

How fast did AWS grow in Q3 2026?

AWS net sales grew 39% to $45,984 million, with operating income of $17,773 million and a 38.7% operating margin. The release calls it AWS’s fastest growth in nearly five years and puts the annualized run rate at $184 billion.

How much did Amazon spend on capex in Q3 2026?

Purchases of property and equipment were $77,259 million in the quarter, against $35,095 million a year earlier. Amazon continues to expect about $220 billion of cash capital expenditures for 2026. Trailing-twelve-month free cash flow was an outflow of $42.4 billion.

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Sources and method. Every Q3 company figure (the statements of operations, cash flows and balance sheet, the segment information, the supplemental metrics, the Q4 guidance and the Jassy quotation) comes from Exhibit 99.1 to the Form 8-K filed 2026-10-29 (accession 0001018724-26-000038) for the quarter ended 2026-09-30, read directly from SEC EDGAR and linked above. The filing was accepted at 4:05 pm ET on October 29, after the US market closed; the release scheduled its call for 5:00 p.m. ET. Customer-contract commitments, the OpenAI and Anthropic investment figures and senior notes come from the Form 10-Q filed 2026-10-30 (accession 0001018724-26-000040); the June 30 commitments figure comes from the Q2 Form 10-Q (accession 0001018724-26-000026). The Q3 guidance ranges and Q2 three-month cash flows come from the Q2 release (Form 8-K, Exhibit 99.1, accession 0001018724-26-000024).

No consensus estimate is included, so this piece makes no claim that the quarter beat or missed expectations; the only comparisons are with Amazon’s own filed guidance and with prior periods. This piece makes no claim about the share-price reaction.

Our arithmetic, labelled as such: net sales $56 million below the top of the guidance range and operating income $1.6 billion above it; AWS’s 63% and 66% shares of operating income; the 25% increase in depreciation and amortization; the $82 billion (17%) increase in contract commitments; AWS’s 73% share of net additions to property and equipment; North America plus International operating income up 72% against AWS’s 55%; Q3 purchases of property and equipment above first-half 2025 purchases ($77,259 million against $57,202 million, nine-month 2025 $92,297 million less Q3 2025 $35,095 million); purchases at about 1.8 times operating cash flow; the $10.7 billion increase in operating income; single-quarter free cash flow of about −$33,456 million, −$7,689 million and $1,297 million; purchases of property and equipment about 120% above a year earlier, 43% above Q2 and 38% of net sales; nine-month net purchases of $172.2 billion and the roughly $48 billion left for Q4 under the $220 billion estimate; and cash and marketable securities of $114.2 billion. These are approximations built on the disclosed figures, not reported numbers. The segment margins, the 61% operating-income growth and the 12%, 13%, 39% and 6% growth rates are as printed in the release’s supplemental tables. The interpretation (that the operating story and the cash story point in different directions this quarter, and that debt is bridging them) is our analysis, not a company statement, and is not a forecast.

Related: Amazon Q2 2026, the prior quarter; Alphabet Q3 2026 and Microsoft Q1 FY2027, the other two large cloud providers, reported the evening before; and CoreWeave Q2 2026, which also sells AI compute capacity.