Amazon Posts Record Operating Margin as AWS Growth Accelerates to 39%

Amazon posted the highest operating margin in its history in the third quarter, as operating income jumped to $28.1 billion and sales at Amazon Web Services grew 39.3%, which the company called AWS's fastest growth in nearly five years, according to the earnings release it filed with an 8-K on Thursday.

Net sales rose 12% to $201.9 billion from $180.2 billion a year earlier, or 13% excluding a $0.9 billion unfavorable foreign-exchange impact. Operating income rose from $17.4 billion, and the operating margin reached 13.9%.

Amazon said the comparison was weighed down by the calendar. Prime Day took place in the second quarter this year for most large countries, while in 2025 it fell entirely in the third quarter. Excluding that shift, the company said, third-quarter growth would have been about 400 basis points higher.

AWS does the heavy lifting

AWS segment sales rose 39% to $46.0 billion, putting the cloud unit at a $184 billion annualized revenue run rate. AWS operating income climbed to $17.8 billion from $11.4 billion, making it the largest profit contributor of the three segments.

"Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028," CEO Andy Jassy said in the release. "There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years."

The company said Fortune 500 companies spent nearly 7 times more on Amazon Bedrock, its AI inference service, than a year earlier, while total Bedrock token volume grew nearly 17 times.

Retail margins improve

North America segment sales rose 6% to $112.9 billion, and segment operating income rose to $8.7 billion from $4.8 billion. International sales grew 5% to $43.1 billion, or 8% excluding currency changes, with operating income of $1.6 billion versus $1.2 billion.

Advertising revenue grew 12% excluding currency changes, which Amazon said was affected by timing anomalies mainly tied to Prime Day. It expects advertising revenue to grow in the high teens in the fourth quarter.

Profit dips on tough comparison, cash flow turns negative

Net income slipped to $20.7 billion, or $1.89 a diluted share, from $21.2 billion, or $1.95, a year earlier. Amazon said the decline was driven mainly by $9.5 billion of pre-tax gains on its Anthropic investments that were included in the year-earlier quarter.

Heavy spending on AI infrastructure is showing up in cash flow. Trailing 12-month operating cash flow rose 29% to $168.3 billion, but free cash flow swung to an outflow of $42.4 billion from an inflow of $14.8 billion. The company attributed that mainly to a $94.8 billion year-over-year increase in purchases of property and equipment, net of proceeds from sales and incentives, which it said primarily reflects investments in AI.

Holiday-quarter outlook

For the fourth quarter, Amazon expects net sales of $240.0 billion to $247.0 billion, up 12% to 16% from a year earlier, and operating income of $28.5 billion to $33.5 billion, compared with $25.0 billion in the fourth quarter of 2025. It continues to expect 2026 cash capital expenditures of about $220 billion.

By the numbers

• $201.9 billion: third-quarter net sales, up 12%
• $28.1 billion: operating income, with a record 13.9% margin
• $46.0 billion: AWS sales, up 39%
• $1.89: diluted EPS, versus $1.95 a year earlier
• About $220 billion: expected 2026 cash capital expenditures

Sources

1. Amazon Form 8-K with third-quarter 2026 earnings release (Exhibit 99.1), filed Oct. 29, 2026 (accession 0001018724-26-000038)

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