The short version
Amazon (AMZN) reported on Thursday after the close, and the shares fell. Revenue and earnings both came in slightly below expectations.
But the operating numbers were the best in the company's history. Operating income of $28.1 billion, up 61%, at a record 13.9% operating margin.
AWS is why. Cloud revenue grew 39.3% to $46 billion, its fastest in nearly five years and the sixth consecutive quarter of acceleration.
Here is the figure worth sitting with. AWS is under a quarter of Amazon's revenue and produced roughly 63% of its operating income. The shop pays the bills. The cloud makes the money.
The miss itself was small: earnings of $1.89 a share against about $1.96 expected, on revenue of $201.9 billion against roughly $202.2 billion.
And one reason profit dipped has nothing to do with Amazon's business. Last year's quarter included a $9.5 billion pre-tax gain on its stake in Anthropic. This year had no such gain, so net income slipped to $20.7 billion from $21.2 billion.
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What Amazon reported
- 💵 Revenue: $201.9 billion, up 12%, or 13% excluding currency effects. Slightly below the roughly $202.2 billion expected.
- 📊 Earnings: $1.89 a share, against about $1.96 expected.
- 🏆 Operating income: $28.1 billion, up 61%, at a record 13.9% operating margin.
- ☁️ AWS: $46.0 billion, up 39.3%, with operating income of $17.8 billion at a 38.7% margin.
- 🇺🇸 North America: $112.9 billion, up 6%, with operating income nearly doubling to $8.72 billion.
- 🌍 International: $43.1 billion, up 5%, or 8% excluding currency.
- 📣 Advertising: $19.6 billion, up 12%, with the company expecting high-teens growth to return in the fourth quarter.
One timing detail that makes the headline look worse than it is. Prime Day moved to the second quarter this year for most large countries, having fallen entirely in the third quarter last year. Amazon says that without the shift, year-on-year growth would have been roughly 400 basis points higher.
The AWS numbers behind the headline
- 📈 39.3% growth, the fastest in nearly five years, and the sixth consecutive quarter of acceleration.
- 💰 $3.8 billion added in a single quarter, taking the annualised run rate to $184 billion.
- 📚 Backlog of $578 billion of contracted work not yet delivered, growing at triple-digit rates.
- 🔭 Chief executive Andy Jassy has projected AWS growth above 40% in both 2027 and 2028.
That backlog figure deserves attention. As we found with GE Vernova's power-equipment order book, contracted work tells you more about the next few years than any forecast does, because customers have already committed.
Where Amazon's profit actually comes from
AWS is roughly 23% of Amazon's revenue. It produced about 63% of its operating income.
Sit with that for a moment. The company most people picture as a shop makes most of its profit renting computing power to other businesses.
The split, in round numbers:
- 🛒 North America: $112.9 billion of revenue, $8.72 billion of operating income. A 7.7% margin.
- ☁️ AWS: $46.0 billion of revenue, $17.8 billion of operating income. A 38.7% margin.
Five times the margin, on a quarter of the revenue. Retail is an enormous, low-margin logistics business that happens to fund an extremely profitable technology business.
Why this matters when you read about Amazon. Headlines about consumer spending, delivery costs or warehouse automation describe the larger part of the company and the smaller part of its profit. If you want to know how Amazon will do, AWS is the number to watch.
It is the same lesson as Mastercard, where value-added services grew 19% while volumes grew 7%: the headline business and the profit engine are often different things.
The $9.5 billion that wasn't there this year
Amazon's net income fell slightly, to $20.7 billion from $21.2 billion, and the reason is almost entirely accounting.
Last year's third quarter included a $9.5 billion pre-tax gain on Amazon's investment in Anthropic. This year contained no equivalent gain, so the comparison looks worse than the business performed. Operating income, which excludes those investment marks, rose 61%.
We have now seen this twice in one week. Alphabet's earnings per share fell because of an $8.2 billion unrealised loss on its SpaceX stake, while its operating income rose 30%. Same mechanism, different company, opposite direction.
The habit: when net income and operating income disagree, find out what sits between them. It is frequently an investment mark that says nothing about how the business traded.
Three cloud giants, one week, three reactions
All three accelerated. Only one share price rose.
- 🟦 Alphabet: Google Cloud grew 103%, operating income up 30%, capital spending $51.4 billion, free cash flow negative $9.1 billion. Shares fell.
- 🟩 Microsoft: Azure grew 48%, and management guided to 49-50% next quarter against a 45% consensus. Shares rose about 4%.
- 🟧 Amazon: AWS grew 39.3%, its fastest in five years, with a record company margin. Shares fell.
What separated them was not growth. It was the gap between what each delivered and what was already expected. Microsoft gave investors a forward number that beat expectations. Alphabet and Amazon both delivered strong operating results alongside headline figures that disappointed.
For anyone learning to read earnings, that trio in one week is the lesson. The share price responds to the surprise, not the performance.
What could go wrong
- 💸 The spending is enormous and the cash flow has turned negative. Amazon is holding 2026 capital spending at roughly $220 billion, and trailing twelve-month free cash flow was an outflow of about $42.4 billion. That is a deliberate choice, and it is a very large one.
- 💳 Debt and interest costs are rising as the build-out scales, which adds a fixed cost to a business that has historically funded itself from operations.
- 🧠 Memory chip supply is a genuine constraint. As hard drive prices up around 50% showed, the components data centres need are scarce and expensive right now.
- 🛒 The retail business is growing slowly. North America up 6% and International up 5% are not the numbers of a company growing quickly outside the cloud.
- 📣 Advertising decelerated to 12% growth, with management expecting a return to high teens next quarter. That is a promise rather than a result.
- 📈 And expectations are now set by Jassy himself, who has publicly projected AWS growth above 40% in 2027 and 2028. That is a high bar to have set in public.
AMZN is an example to research, not a recommendation.
What should investors take from this?
Find out which part of a company makes the money.
Amazon is the clearest example in the market: a shop with a 7.7% margin attached to a cloud business with a 38.7% margin, where the smaller business produces most of the profit. Judging it by retail headlines means watching the wrong number.
Three habits:
- 🔍 Read the segment table before the headline. It is usually the second page of a results release, and it is where the real story sits.
- ⚖️ Separate operating income from net income. The gap is often an investment mark, like the $9.5 billion Anthropic gain that flattered last year's comparison.
- 🧺 And remember the index route. Amazon sits near the top of every broad US fund, so roughly 38% of the S&P 500 is its ten largest members and this quarter moved a lot of portfolios that never chose it.
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FAQs
What did Amazon report for Q3 2026? Revenue of $201.9 billion, up 12%, slightly below the roughly $202.2 billion expected, with earnings of $1.89 a share against about $1.96 expected. Operating income rose 61% to $28.1 billion at a record 13.9% margin. AWS revenue grew 39.3% to $46.0 billion.
Why did Amazon shares fall despite record margins? Revenue and earnings both came in slightly below expectations, and the company is spending roughly $220 billion on capital expenditure in 2026 with trailing twelve-month free cash flow an outflow of about $42.4 billion. Markets price the surprise relative to expectations rather than the absolute result.
How much of Amazon's profit comes from AWS? AWS generated about 63% of Amazon's operating income from under a quarter of its revenue. Its operating margin was 38.7%, against 7.7% for the North America retail segment.
Why did Amazon's net income fall? Mainly because the prior-year quarter included a $9.5 billion pre-tax gain on Amazon's investment in Anthropic. Operating income, which excludes such investment gains, rose 61%.
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