REVENUEMiss -0.1%
EPSMiss -4.1%
Actuals vs. estimates
| Metric | Actual | Consensus | Surprise |
|---|---|---|---|
| RevenueNet sales | $201.94B | $202.22B | ▼ Miss -0.1% |
| EPS(GAAP diluted) | $1.89 | $1.97 | ▼ Miss -4.1% |
Highlights & what matters
- Net sales of $201.94 billion missed the $202.22 billion estimate by 0.1%, and diluted EPS of $1.89 missed the $1.97 expected by 4.1%.
- Fourth quarter guidance is for net sales of $240-247 billion, up 12-16%, and operating income of $28.5-33.5 billion against $25.0 billion a year ago; 2026 cash capital expenditures remain about $220 billion.
- Operating income rose to $28.1 billion from $17.4 billion, a record 13.9% operating margin, while AWS grew 39% to $46.0 billion at a $184 billion annualised run rate - its fastest growth in nearly five years.
- Free cash flow swung to an outflow of $42.4 billion on a trailing basis from a $14.8 billion inflow, as property and equipment purchases rose $94.8 billion year over year.
- The one thing that matters: both headline misses are artefacts - the revenue shortfall is a Prime Day calendar shift worth roughly 400 basis points of growth, and the EPS decline is last year's $9.5 billion Anthropic gain. Operating income grew 61%.
Key metrics
| Metric | Reported | Prior year | Change |
|---|---|---|---|
| Operating income | $28.1 billion | $17.4 billion | — |
| Operating margin | 13.9% | 9.7 % | Amazon's highest operating margin ever |
| AWS segment operating income | $17.8 billion | $11.4 billion | — |
| AWS annualized revenue run rate | $184 billion | — | AWS net sales increased 39.3%-its fastest growth in nearly five years |
| Operating cash flow, trailing twelve months | $168.3 billion | $130.7 billion | increased 29% |
| Free cash flow, trailing twelve months | an outflow of $42.4 billion | free cash flow inflow of $14.8 billion | driven primarily by a yearover-year increase of $94.8 billion in purchases of property and equipment |
Guidance changes
| Item | New guidance | Prior guidance |
|---|---|---|
| Fourth quarter 2026 net sales | between $240.0 billion and $247.0 billion, or to grow between 12% and 16% compared with fourth quarter 2025 | — |
| Fourth quarter 2026 operating income | between $28.5 billion and $33.5 billion | $25.0 billion in fourth quarter 2025 |
| Fourth quarter 2026 advertising revenue growth | to grow in the high teens in fourth quarter 2026 | — |
| 2026 cash capital expenditures | approximately $220 billion | — |
| AWS revenue growth, 2027 and 2028 | projected revenue growth rates of over 40% both in 2027 and in 2028 | — |
Quality of earnings
- The earnings decline is a prior-year comparison, not this quarter. Net income fell to $20.7 billion from $21.2 billion while operating income rose to $28.1 billion from $17.4 billion; the swing is $9.5 billion of pre-tax gains on the Anthropic investment in the year-ago quarter.
- Cash earnings are strong; free cash flow is negative by choice. Operating cash flow rose 29% to $168.3 billion on a trailing twelve-month basis while free cash flow swung to an outflow of $42.4 billion, driven by $215.2 billion of trailing property and equipment purchases.
- Mix is doing the margin work. AWS reached 23% of sales from 18% a year earlier at a 38.7% operating margin against 34.6%, lifting consolidated operating margin to 13.9% from 9.7%.
Gotchas & watch items
- Advertising decelerated hard: 11% reported growth, 12% excluding currency, against 22% in each of the four prior quarters, with Prime Day timing named as the cause and high-teens growth guided for the fourth quarter.
- Online stores grew 2% against 8% a year earlier, the slowest line in the business and where the revenue shortfall sits.
- The funding of the build is in the balance sheet, not the income statement: long-term debt rose to $173.1 billion from $65.6 billion at year-end 2025, with $48.1 billion raised in the quarter alone and $77.3 billion of property and equipment purchased.
- AWS growth is accelerating into harder comparisons - 39% against 20% a year ago - and management put 2027 and 2028 growth above 40%, a forward commitment the release makes in passing.