Amazon earns money from selling goods, serving independent sellers, advertising, subscriptions, and renting computing services through Amazon Web Services, or AWS. In the third quarter of 2026, faster AWS growth helped lift consolidated operating profit to $28.1 billion. Yet during the first nine months, Amazon spent $58.3 billion more on property and equipment, after sales proceeds and incentives, than its operations generated in cash. The business is becoming more profitable while its expansion requires much more outside funding.
Analysis period: quarter and nine months ended September 30, 2026. Research cutoff: October 31, 2026, New York time; the latest company commentary used below was published October 30.
Source: Amazon Q3 2026 Form 10-Q, consolidated statements, pp. 3–6; cash-spending calculation in Note C below.
1. AWS supplies most of the additional sales and operating profit
AWS generated about 60% of Amazon’s year-over-year increase in both quarterly revenue and operating profit. Customers used more computing services, while AWS’s costs rose more slowly than its sales. Amazon says pricing changes associated mainly with long-term contracts partly offset that increase in usage. This is evidence of customers buying more computing capacity, rather than growth driven simply by higher prices.
The segment comparison shows where the improvement occurred. North America and International include retail, seller services, advertising, and subscriptions; they are not measures of merchandise retail alone.
| Reported segment results, US$ billion | Q3 2025 revenue | Q3 2026 revenue | Q3 2025 operating profit | Q3 2026 operating profit |
|---|---|---|---|---|
| North America | 106.267 | 112.852 | 4.789 | 8.723 |
| International | 40.896 | 43.108 | 1.199 | 1.580 |
| AWS | 33.006 | 45.984 | 11.434 | 17.773 |
| Consolidated | 180.169 | 201.944 | 17.422 | 28.076 |
Source: Q3 2026 Form 10-Q, Note 8, pp. 23–24; management’s discussion, pp. 30–34. Calculated contributions use each segment’s increase divided by the consolidated increase.
AWS revenue grew 39.3%, and its operating margin—the share of revenue left after operating costs—rose from 34.6% to 38.7%. It produced 63.3% of Amazon’s quarterly operating profit. That improvement came despite AWS property-and-equipment depreciation rising from $5.648 billion to $9.230 billion. Depreciation spreads the cost of equipment over the years Amazon expects to use it; the rising charge shows that the larger installed equipment base is already affecting profit.
The growth also extends beyond one quarter. AWS’s third-quarter revenue was $27.452 billion in 2024, $33.006 billion in 2025, and $45.984 billion in 2026. Its year-over-year growth therefore accelerated from 20.2% to 39.3%. For the first nine months of 2026, AWS revenue grew 35.1% and operating profit reached $48.555 billion, compared with $33.141 billion a year earlier.
Sources: Q3 2026 Form 10-Q, Note 8, pp. 24–26; Q3 2025 Form 10-Q, Note 8, segment results.
Amazon’s total quarterly revenue rose 12.1%, while reported operating profit increased 61.2%. The profit comparison benefits from an unusually costly prior-year quarter: Amazon recorded a $2.5 billion FTC settlement charge and approximately $1.8 billion of severance costs in Q3 2025. Adding those two charges back to the prior-year figure reduces the calculated operating-profit growth to approximately 29.3%. The improvement remains substantial, but the reported 61.2% overstates the improvement relative to that less burdened comparison.
The settlement affected North America, while severance affected all three segments. Because Amazon did not disclose a complete segment allocation of the severance charge, the segment margins above remain reported figures. The calculation in Note A removes only the specified prior-year charges; it does not establish a recurring earnings level.
Sources: Q3 2025 earnings release, p. 1; Q3 2025 Form 10-Q, Note 1; Q3 2026 Form 10-Q, statements of operations.
Across the first nine months, consolidated revenue rose from $503.538 billion to $584.069 billion, and operating profit increased from $54.998 billion to $79.389 billion. The operating margin rose from 10.9% to 13.6%. Amazon therefore has a larger operating earnings base to support expansion, even after allowing for the favorable quarterly comparison.
Source: Q3 2026 Form 10-Q, consolidated statements of operations, p. 4.
2. Retail’s slower quarter partly reflects a shifted shopping event
Prime Day’s move into June makes the third-quarter retail slowdown look larger than the underlying change in shopping activity. The event occurred entirely in Q3 in 2025, but in Q2 for most large countries in 2026. Amazon estimated that, without that timing shift, consolidated third-quarter revenue growth would have been about four percentage points higher. That is management’s estimate, not additional reported revenue.
Sources: Amazon’s Q3 2026 earnings release, opening revenue discussion, October 29, 2026; Prime Day announcement, June 1, 2026, confirming June 23–26 dates.
The nine-month comparison includes the event in both years and provides a useful second view. Online-store revenue grew only 1.6% in the quarter, but 9.0% over nine months. Advertising increased 10.9% in the quarter and 19.8% over nine months. Seller-service and subscription revenue also grew faster over the cumulative period.
| Revenue, US$ billion | Q3 2025 | Q3 2026 | First nine months 2025 | First nine months 2026 |
|---|---|---|---|---|
| Online stores | 67.407 | 68.470 | 186.299 | 203.156 |
| Third-party seller services | 42.486 | 46.492 | 119.346 | 134.850 |
| Advertising services | 17.703 | 19.637 | 47.318 | 56.689 |
| Subscription services | 12.574 | 14.006 | 36.497 | 41.163 |
Source: Q3 2026 Form 10-Q, Note 8, p. 25. Seller-service revenue consists of commissions and related service fees, not the full value of sellers’ merchandise. Subscription revenue includes Prime and other non-AWS subscriptions.
That distinction matters for understanding Amazon’s business. When Amazon sells its own merchandise, it generally records the product’s full selling price as revenue. When an independent seller makes the sale, Amazon records its fees. A change in the mix can therefore change reported revenue without an equivalent change in the value of goods customers buy. Advertising and subscription growth adds another source of revenue, but Amazon does not disclose a separate advertising operating profit.
International revenue rose 5.4% as reported, or about 8% excluding currency changes. A stronger dollar reduced translated International revenue by $927 million and operating profit by $125 million. Those effects account for part of the difference between operating progress abroad and the results reported in dollars.
Source: Q3 2026 Form 10-Q, Note 8 and management’s discussion, pp. 30–35.
Management’s retail strategy is to make delivery faster while reducing the cost of serving each order. In commentary published October 30, Andy Jassy said units sold had grown nearly 15% year to date and that Amazon was on track for a fourth consecutive annual reduction in cost per unit served. He also said fresh groceries and everyday essentials represented about half of Q3 units. More frequent purchases give Amazon more opportunities to spread delivery-network costs across orders, provided delivery routes and facilities remain productive.
Source: Amazon’s October 30 commentary on Stores, management statements on units, delivery, costs, and groceries. The cost reduction is a management outlook; the explanation of how more orders can spread network costs is analytical interpretation.
There is a real cost to that strategy. Quarterly shipping expense rose from $25.3 billion to $28.3 billion, and fulfillment expense increased from $27.679 billion to $29.997 billion. Amazon attributes the increases to sales growth and network investment, partly offset by operating efficiencies. North America’s reported operating margin reached 7.7%, versus 4.5% a year earlier; International reached 3.7%, versus 2.9%. The prior-year charges discussed above affect those comparisons. The useful conclusion is that the businesses earned more while carrying higher delivery costs, with advertising, unit growth, and efficiency all contributing.
Source: Q3 2026 Form 10-Q, management’s discussion, pp. 31–34, and Note 8.
3. Amazon is both supplying and financing major AI customers
Large customer commitments support the cloud buildout, but Amazon is also putting substantial capital into two of those customers. This links its future cloud revenue, investment holdings, and cash needs to the development of Anthropic and OpenAI.
At September 30, commitments for future services under contracts originally longer than one year, primarily AWS contracts, totaled approximately $578 billion. They stood at $244 billion at the end of 2025 and $496 billion at June 30, 2026. Their weighted-average remaining life increased from 4.1 years at year-end to 6.1 years in September. The larger total therefore represents both more contracted business and a longer delivery period. Revenue still depends on customer usage and Amazon performing its obligations.
Sources: Q3 2026 Form 10-Q, Note 1, pp. 9–10; Q2 2026 Form 10-Q, Note 1, unearned revenue; 2025 Form 10-K, Note 1, unearned revenue.
OpenAI expanded its existing $38 billion AWS agreement by $100 billion over eight years. Anthropic expanded its commitment by more than $100 billion over ten years. These arrangements include obligations concerning the performance of AWS chips. The commercial purpose is clear: customers secure computing capacity, while Amazon gains demand for infrastructure and its own processors.
The customers’ announcements add evidence about the intended equipment. OpenAI committed to approximately two gigawatts of Trainium capacity, spanning Trainium3 and Trainium4; its February announcement expected Trainium4 deliveries to begin in 2027. Anthropic’s April announcement described up to five gigawatts of new capacity and said it was already using more than one million Trainium2 chips. These are customer-specific deployment plans and disclosures, not measurements of AWS-wide profitability.
Sources: Q3 2026 Form 10-Q, Notes 1–2; OpenAI partnership announcement, February 27, 2026; Anthropic compute agreement, April 20, updated April 21, 2026.
Amazon invested $50 billion in OpenAI during the first nine months, completing the final $21.3 billion payment in Q3. It also invested $10 billion in Anthropic during the nine-month period. A further Anthropic financing facility had $15 billion remaining after Amazon’s Q2 investment reduced its original capacity. Availability under that facility depends on computing-capacity delivery milestones, and Anthropic can choose whether to draw available amounts.
That funding structure creates a linked business risk. If the AI companies grow successfully, Amazon can benefit from both computing sales and its investments. If their funding or demand weakens, Amazon could face slower capacity use and losses on investment holdings at the same time. The filing does not disclose their separate contributions to current AWS revenue, so their announced commitments cannot be used to calculate today’s customer concentration.
Source: Q3 2026 Form 10-Q, Note 2, pp. 11–13; management’s liquidity discussion, pp. 28–29.
There is evidence supporting demand beyond these two relationships. In its October 30 explanation, Amazon said companies were increasing both conventional computing and AI workloads, and described keeping AI applications close to customers’ existing data as an advantage. Amazon also plans to make Trainium available outside AWS in late 2027. That could broaden the chip business, although the commercial terms and financial contribution were not disclosed.
Sources: Amazon’s AWS commentary and custom-chip commentary, published October 30, 2026; statements reflect management’s assessment and plans.
Competition provides an important check on the interpretation. Microsoft reported 48% Azure revenue growth for the same September quarter, with revenue rising from $22.384 billion to $33.165 billion on its recast reporting basis. Anthropic also makes Claude available through Google Cloud and Microsoft Azure. AWS’s acceleration is therefore consistent with a broad expansion in cloud and AI demand; it does not, by itself, establish that Amazon is gaining market share. AWS must continue delivering useful services at a cost customers will accept as competing capacity expands.
Sources: Microsoft FY2027 first-quarter results, October 28, 2026, business highlights and product revenue table; Anthropic’s April announcement. Azure and AWS have different service mixes; no direct profit-margin comparison is made.
4. Investment revaluations explain why net profit tells a different story
Quarterly net profit fell despite better operations because the prior year contained large investment gains. Net income declined 2.4%, from $21.187 billion to $20.685 billion. Other income swung from a $10.186 billion gain to a $703 million expense, more than offsetting the operating-profit improvement before considering interest and taxes.
The earlier quarter included approximately $9.5 billion of pretax gains associated with Anthropic investments. Such gains arise from changes in investment values and from converting notes into shares; they are not payments from AWS customers. Quarterly interest expense also rose from $538 million to $1.691 billion as borrowing increased. Note B reconciles the complete change in net income.
Source: Q3 2026 Form 10-Q, consolidated statements of operations and Note 1, pp. 4 and 8.
The nine-month comparison runs in the opposite direction. Net income more than doubled, from $56.478 billion to $113.587 billion, helped by $62.853 billion of upward adjustments to private-company equity investments, primarily Anthropic. Those adjustments are pretax. The filing also reports $15.2 billion of net discrete tax expense, primarily related to Anthropic valuation adjustments, but that tax line covers more than a single isolated gain. Applying it mechanically to produce an “underlying” net profit would give a misleadingly precise result.
Source: Q3 2026 Form 10-Q, Note 1, other income; Note 7, income taxes, pp. 22–23.
The same investments account for much of the balance-sheet expansion. Amazon’s Anthropic preferred shares and convertible notes had a combined recorded value of approximately $238.7 billion at September 30. Adding the $50 billion OpenAI holding gives $288.7 billion, about 23% of consolidated assets.
| Recorded investment value, US$ billion | December 31, 2025 | September 30, 2026 |
|---|---|---|
| Anthropic nonvoting preferred shares | 14.8 | 92.5 |
| Anthropic convertible notes | 45.8 | 146.2 |
| OpenAI preferred shares | 0.0 | 50.0 |
| Combined holdings, calculated | 60.6 | 288.7 |
Source: Q3 2026 Form 10-Q, Note 2, pp. 11–13. OpenAI investment began in Q1 2026. Values are rounded as disclosed; the two investees are not consolidated subsidiaries.
Amazon records changes in these instruments through different parts of its accounts. Observable price changes in the preferred shares can affect net income. Unrealized changes in the convertible notes generally enter a separate equity account, called accumulated other comprehensive income, until an event such as conversion moves a gain into earnings. This distinction prevents counting the same gain twice.
The result was a $74.048 billion after-tax increase in other comprehensive income over nine months, alongside reported net income. Together with employee-share compensation and issuance, these movements lifted shareholders’ equity from $411.065 billion to $613.601 billion. They strengthened reported equity without producing an equivalent amount of cash. Note D reconciles the movement.
Source: Q3 2026 Form 10-Q, Notes 2 and 6, pp. 11–13 and 21–22.
The investment values depend on estimates and private-company transactions, rather than continuously available exchange prices. At a future public listing, ownership limits can restrict conversion of Anthropic notes, while lock-up periods and securities rules can delay sales of the holdings. Amazon’s much larger investment portfolio is therefore a meaningful business exposure, but it should not be treated as cash available to pay construction bills.
Source: Q3 2026 Form 10-Q, Note 2 and Item 3, equity investment risk, p. 37.
5. Cash generation improved, but spending and payment timing absorbed it
Operating cash grew 33.8% over nine months, while net cash spending on property and equipment grew 91.6%. Amazon generated more cash from its businesses, but the increase did not keep pace with its construction and equipment purchases.
| Consolidated cash allocation, US$ billion | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Cash generated by operations | 85.055 | 113.841 |
| Gross cash purchases of property and equipment | 92.297 | 175.670 |
| Property-sale proceeds and vendor incentives | 2.446 | 3.482 |
| Net cash capital spending, calculated | 89.851 | 172.188 |
| Operating cash less net capital spending, calculated | -4.796 | -58.347 |
| Acquisitions, nonmarketable investments, and other, net cash used | 2.438 | 63.753 |
Source: Q3 2026 Form 10-Q, consolidated cash-flow statement, p. 3. Net capital spending equals gross purchases less sales proceeds and incentives. The remainder follows Amazon’s non-GAAP free-cash-flow definition, applied here to nine-month periods; it excludes acquisitions, investment purchases, and financing payments.
The $63.753 billion in other acquisition and investment cash spending includes the $60 billion paid into OpenAI and Anthropic. After both net capital spending and that broader investment line, the nine-month cash shortfall was $122.100 billion. Amazon also bought $21.158 billion more marketable securities than it sold or collected at maturity. Net financing inflows of $111.848 billion covered much of these uses, but cash including restricted balances still fell by $31.392 billion.
The longer comparison confirms that the shortfall is not solely a nine-month seasonal effect. Over the twelve months ended September 30, operating cash increased from $130.691 billion to $168.300 billion, while Amazon’s reported free cash flow moved from positive $14.788 billion to negative $42.357 billion.
Source: Q3 2026 Form 10-Q, cash-flow statement and free-cash-flow reconciliation, p. 34. Note C reconciles opening and closing cash.
The operating cash figure also needs explanation. Amazon removed $68.319 billion of non-operating income from the nine-month profit-to-cash calculation, while adding back depreciation and other amortization, employee-share compensation, and deferred taxes. Those entries reverse expenses or income that did not create matching operating cash payments or receipts in the period. Their presence does not make the cash balance larger by itself.
Payments and collections then reduced cash by $42.307 billion across the disclosed operating asset and liability changes, versus $29.239 billion a year earlier. The biggest deterioration was in “accounts receivable, net and other,” whose cash use increased from $1.855 billion to $16.081 billion. In everyday terms, more money was tied up in amounts to be collected and other operating assets rather than available for spending. This line includes more than customer invoices, so it is not a measure of overdue customer bills.
Source: Q3 2026 Form 10-Q, cash-flow statement and Note 1. The complete profit-to-cash arithmetic is in Note C.
The balance-sheet detail supports that distinction. Net customer receivables rose from $40.4 billion to $52.6 billion, and net vendor receivables rose from $15.9 billion to $28.8 billion. The wider receivables-and-other-current-assets line increased from $67.729 billion to $98.242 billion. Cash-flow changes and balance-sheet changes have different scopes and should not be substituted for one another.
Inventory rose from $38.325 billion to $42.632 billion before the holiday quarter, when Amazon expects a disproportionate share of annual retail sales. Its inventory write-down allowance fell from $3.3 billion to $3.0 billion, but the filing does not provide a rollforward establishing how much of that change affected profit. The business test is whether goods sell without excessive discounts while Amazon maintains availability; the lower allowance alone does not answer it.
Source: Q3 2026 Form 10-Q, balance sheet; Note 1, inventories and receivables, p. 9; retail seasonality risk, p. 40.
Supplier credit is also helping Amazon obtain equipment before paying for it. Property and equipment acquired but not yet paid increased by $21.473 billion during the nine months. Some technology-equipment arrangements allow payment terms of up to one year. These amounts help explain why accounts payable increased by $36.806 billion on the balance sheet while the operating cash-flow adjustment for payables contributed only $2.207 billion. Equipment payments belong in investing cash flow when paid. The filing does not provide a complete bridge for the remaining difference.
Source: Q3 2026 Form 10-Q, Note 1, supplemental cash flows, p. 7; Note 4, property-and-equipment commitment footnote, p. 15.
Cash taxes were $5.293 billion, compared with $6.774 billion a year earlier. Amazon describes accelerated deductions and expected reductions in prior-year cash taxes under guidance on previously capitalized research costs. Lower tax payments left more cash available this period, but the filing does not quantify each cause of the decline or establish a permanent tax saving. The $35.522 billion deferred-tax adjustment in the cash-flow reconciliation is already included in operating cash; it must not be added again as another source of funding.
Employee shares also preserve cash while creating a compensation cost and dilution. Nine-month stock compensation was $15.476 billion, versus $15.070 billion. Outstanding common shares increased by about 80 million from year-end, broadly matching 79.5 million restricted units that vested. Amazon made no common-share repurchases during either nine-month period, and the cash-flow statements show no cash dividends. Quarterly diluted average shares rose 0.8%, helping explain why diluted earnings per share fell from $1.95 to $1.89, a 3.1% decline, slightly faster than net income’s 2.4% decline.
Source: Q3 2026 Form 10-Q, Notes 1, 6, and 7; cash-flow and earnings statements. Issued shares, vested awards, and weighted-average diluted shares are different measures; the figures above preserve those distinctions.
6. Longer borrowing terms provide time, while commitments keep growing
Amazon retains substantial liquidity, but it is becoming more dependent on financing the buildout over several years. Cash and marketable securities totaled $114.226 billion at September 30, down from $123.029 billion at year-end. Borrowings at carrying value, including current maturities and other short-term facilities but excluding leases, rose from $68.851 billion to $180.332 billion.
The equipment is being installed principally to expand AWS and the delivery network. Consolidated property and equipment increased from $357.025 billion to $508.862 billion. AWS accounted for about 81% of that increase, with its balance rising from $190.055 billion to $313.009 billion. Amazon expressly attributes most technology-infrastructure investment to AWS growth; the filing does not divide spending into maintenance and expansion amounts.
Source: Q3 2026 Form 10-Q, Notes 2, 5, and 8; liquidity discussion, pp. 28–29. Borrowing calculation: long-term balance plus its current portion plus other short-term borrowings.
Amazon raised $115.100 billion of long-term debt cash proceeds during the nine months. The senior notes had a weighted-average remaining life of 13.9 years, spreading repayment across a long period. The $17.5 billion term loan drawn in September matures in September 2029 and bears a floating rate: the specified SOFR benchmark plus 0.625–0.875 percentage points, depending on credit ratings. That creates a visible refinancing concentration in 2029 even though much of the bond debt matures later.
The commitments table shows the payment burden, including interest. It also shows that the equipment and building pipeline requires payments beyond the debt already on the balance sheet.
| Contractual payments, US$ billion, as of September 30, 2026 | Remaining 2026 | 2027 | 2028 | 2029 | Total across all years |
|---|---|---|---|---|---|
| Debt principal and interest | 1.413 | 16.566 | 19.567 | 39.185 | 294.254 |
| Existing operating leases | 5.320 | 15.889 | 14.938 | 13.760 | 121.492 |
| Existing finance leases, including interest | 0.730 | 1.956 | 2.061 | 1.824 | 17.955 |
| Leases not yet begun | 2.590 | 12.448 | 11.477 | 12.193 | 164.922 |
| Unconditional property-and-equipment commitments | 13.955 | 63.900 | 25.220 | 25.400 | 159.640 |
Source: Q3 2026 Form 10-Q, Note 4, p. 15. Total columns include 2030 and later years not shown separately. Rows are selected categories, not all commitments. Lease payments include future interest and differ from discounted balance-sheet liabilities. Equipment commitments exclude generally cancellable normal purchase orders and do not include all possible variable-price payments.
The debt schedule contains approximately $113.367 billion of future interest above the $180.887 billion face amount of long-term debt. That interest extends across the contractual life of the obligations; it is not one year’s expense. Current interest costs are already rising, as the quarterly earnings comparison showed.
Lease obligations are another substantial claim on future cash. Recorded operating and finance lease liabilities, including current portions, increased from $101.538 billion to $114.783 billion. Operating lease cash payments were $12.406 billion over nine months, and finance-lease principal repayments were $1.296 billion. Those payments sit in different cash-flow categories, which is why a free-cash-flow figure alone does not show every property-related payment.
Source: Q3 2026 Form 10-Q, Notes 1, 3–5 and cash-flow statement. Future interest is calculated as $294.254 billion total scheduled debt payments less $180.887 billion principal face value.
Amazon also arranged access to up to approximately $80 billion of secured supplier financing for technology infrastructure. Borrowings are scheduled to become available from Q1 2027 through Q3 2028, depend on purchases and pricing, carry variable interest, and mature five years after each draw. Purchased assets will secure the loans. This provides a way to obtain equipment while spreading cash payments into later years, but it also commits future cash to principal and interest. It was not $80 billion of cash already borrowed at September 30.
After quarter-end, on October 27, Amazon replaced its revolving credit agreements with a $15 billion facility extending to October 2031 and a $5 billion facility maturing in October 2027. The September facilities were undrawn. The replacement agreements and senior notes have no financial-ratio covenants, although other covenants and default provisions still apply. The revolvers also back commercial paper, so adding the full revolver and commercial-paper capacities together would exaggerate independent funding support.
Source: Q3 2026 Form 10-Q, Note 5, pp. 18–19; Part II, Item 5, pp. 51–52.
This funding access gives Amazon time to turn installed capacity into customer payments. The harder task is controlling the length of that wait. Equipment can become outdated sooner than expected: Amazon shortened the estimated life of a subset of servers and networking equipment from six to five years in 2025, citing faster AI-related technological change. The current buildout must generate sufficient operating earnings and cash before replacement needs and financing payments arrive.
Sources: 2025 Form 10-K, Note 1, changes in estimated equipment lives; Q3 2026 Form 10-Q, Notes 4–5.
7. The next phase depends on delivery, customer use, and regulatory outcomes
The near-term plan combines further profit growth with continued heavy spending. Management’s October 29 outlook calls for fourth-quarter revenue of $240–247 billion and operating profit of $28.5–33.5 billion, compared with $25.0 billion of operating profit in Q4 2025. It expects advertising revenue growth to return to the high teens. These forecasts assume no energy-contract remeasurement effect and no additional acquisitions, restructurings, or legal settlements.
Amazon maintained its approximately $220 billion forecast for 2026 cash capital spending and said spending would increase meaningfully in 2027, mainly for technology infrastructure. Against the $172.188 billion spent net of proceeds and incentives through September, the annual forecast implies approximately $47.812 billion in Q4 on the same basis. That is an arithmetic implication of guidance, not a separate company forecast or a prediction of fourth-quarter free cash flow. In the earnings release, Jassy also projected AWS revenue growth above 40% in both 2027 and 2028. Timely capacity delivery and customer usage are essential for that outlook to become cash receipts.
Sources: Q3 2026 Form 10-Q, liquidity discussion, pp. 28–29; guidance, p. 36; October 29 earnings release, CEO statement.
Power supply is part of the execution challenge. Amazon enters long-duration electricity contracts to secure supply for existing and future operations. Certain contracts covered about 690 million megawatt-hours at September 30, with an average remaining duration of 18 years. Where the company can settle differences in cash, accounting rules require periodic valuation changes. Those changes added $91 million to Q3 operating profit and $690 million over nine months, primarily in AWS, without generating corresponding cash from revaluation. Contracting for power supports capacity expansion, while both actual consumption and future electricity prices affect the economics.
Source: Q3 2026 Form 10-Q, Note 1, energy contracts, pp. 8–9. The quantities describe contracts subject to derivative accounting, not all Amazon electricity procurement.
Amazon also wants its satellite network to connect mobile devices beyond the reach of conventional cellular networks. To add satellite operations, spectrum rights, and expertise for that service, Amazon agreed to acquire Globalstar in a transaction valued at approximately $10.9 billion including debt when announced. Closing is expected in 2027, subject to regulatory approval and satellite-replacement milestones. The agreement also includes arrangements to provide services to Apple, Globalstar’s largest customer. Final consideration depends on the contractual cash-and-share elections and other conditions.
Amazon currently expenses most development costs for its satellite broadband network, including production and launches. It plans to capitalize certain costs once the service reaches commercial viability, including customer sales. That accounting change would spread some future costs over time instead of charging them immediately, so a later improvement in reported profit would need to be considered alongside cash spending and service revenue.
Sources: Globalstar acquisition announcement, April 14, 2026, purpose and proposed satellite services; Q3 2026 Form 10-Q, Note 4, pp. 15–16; technology-and-infrastructure discussion, p. 32.
Legal risks reach the operating model as well as the cash account. The FTC and 22 states sued Amazon in August over allegedly misleading sponsored-ad auction pricing, while Texas filed a separate case. Amazon disputes the allegations and argues that its approach improves advertising relevance and results. A remedy that changes auction practices could affect how Amazon earns advertising revenue, in addition to any monetary award. The amount of a possible loss is not quantified in the filing.
Sources: FTC announcement, August 31, 2026; Amazon’s response; Q3 2026 Form 10-Q, Note 4, pp. 16–17. Allegations and Amazon’s rebuttal are opposing positions, not adjudicated findings.
Separate competition cases seek damages and changes to business practices, including possible structural remedies. Xockets’ patent proceedings also seek restrictions involving AWS infrastructure products. Amazon says it cannot estimate losses for certain disclosed matters, or considers the possible amounts immaterial; that disclosure does not resolve the risk of operating restrictions. Income-tax contingencies rose from about $6.6 billion to $7.3 billion, and their payment timing remains uncertain. These exposures matter because unexpected payments or required business changes would arrive while the company is already financing a large investment program.
Source: Q3 2026 Form 10-Q, Notes 4 and 7, pp. 16–17 and 22–23.
8. Stronger operations now have to support a much larger financial commitment
Amazon has demonstrated stronger operating performance; the unresolved test is how quickly that performance can catch up with its investment commitments. AWS is selling more services at a higher reported operating margin, and the retail businesses are absorbing higher delivery costs while earning more. The improvement survives a reasonable allowance for last year’s exceptional charges.
Large customer contracts and demonstrated chip use give the expansion a business foundation. At the same time, Amazon is funding equipment, investing in major customers, and taking on debt and long-term payment commitments together. Investment revaluations have enlarged reported earnings and equity much faster than they have supplied spendable cash.
The business assessment would strengthen if installed capacity converts into sustained customer usage and collections, while spending growth slows relative to operating cash generation. It would weaken if equipment delivery or customer funding delays revenue, if replacement costs arrive sooner, or if regulatory remedies reduce the earnings available to service the larger commitments. For now, the operating progress is clear, and continued access to financing is an important part of carrying the expansion through its next stage.
Reporting basis and calculation notes
Reporting basis: Amazon.com, Inc., CIK 0001018724; Form 10-Q, accession 0001018724-26-000040, filed October 30, 2026, for the period ended September 30, 2026. The analysis uses unaudited consolidated US GAAP accounts, including controlled subsidiaries and qualifying consolidated entities, with intercompany balances eliminated. Anthropic and OpenAI are investment holdings outside Amazon’s consolidation scope. Quarter means July–September; first nine months means January–September; twelve-month cash comparisons end September 30. Balance-sheet comparisons use December 31, 2025 and September 30, 2026.
Reporting basis: Research was limited to information available by October 31, 2026, New York time. The filing incorporates October 27 credit-facility changes and October 29 guidance. Relevant company explanations published October 30 were also reviewed. This is not a claim that every development through the cutoff was independently surveyed. Historical comparisons use original filings.
Sources: SEC filing; SEC submission history; SEC company facts. Figures were cross-checked against the SEC’s machine-readable financial facts where available, using the same filing, dates, dollar units, and reporting periods. Footnotes supply the company-specific details.
Note A. Checking the effect of the prior-year charges
Calculation notes: The table keeps both years on a pretax operating-profit basis. It adds back only the two specified Q3 2025 charges. The resulting comparison retains every other reported expense and gain, including Q3 2026’s $91 million energy-contract valuation gain. No adjusted net income or after-tax charge estimate is calculated.
| Operating-profit comparison, US$ billion | Q3 2025 | Q3 2026 |
|---|---|---|
| Reported operating profit | 17.422 | 28.076 |
| Add back the specified Q3 2025 FTC charge | 2.500 | 0.000 |
| Add back the specified Q3 2025 severance charge | 1.800 | 0.000 |
| Result after these specified adjustments, calculated | 21.722 | 28.076 |
Calculation notes: Reported growth = 28.076 ÷ 17.422 − 1 = 61.2%. Growth against the adjusted prior-year amount = 28.076 ÷ 21.722 − 1 = approximately 29.3%. The latter is approximate because the charges were disclosed in rounded billions. Operating margins throughout the report equal operating profit divided by matching-period revenue; margin changes are percentage points.
Sources: Q3 2025 earnings release, p. 1; Q3 2026 Form 10-Q, statement of operations and Note 1.
Note B. Reconciling the quarterly net-profit decline
Calculation notes: Each change below is the 2026 amount minus the comparable 2025 amount, with the sign showing its effect on net income. The first four changes affect pretax profit; the final two complete the after-tax reconciliation.
| Net-income bridge, US$ billion | Amount |
|---|---|
| Q3 2025 net income | 21.187 |
| Higher operating profit | +10.654 |
| Higher interest income | +0.087 |
| Higher interest expense | -1.153 |
| Lower other income | -10.889 |
| Lower income-tax expense | +0.730 |
| Smaller after-tax equity-method loss | +0.069 |
| Q3 2026 net income | 20.685 |
Source: Q3 2026 Form 10-Q, consolidated statements of operations, p. 4. This bridge uses reported totals and does not estimate taxes attributable to individual investment gains.
Note C. Checking profit, cash generation, and closing cash
Calculation notes: The first table explains why nine-month profit differs from operating cash. “Operating asset and liability changes” sums the six disclosed cash-flow adjustments for inventory, receivables and other, other assets, accounts payable, accrued expenses and other, and unearned revenue. These amounts measure cash timing; they are not simple changes in the balance-sheet accounts.
| Profit-to-operating-cash reconciliation, US$ billion | First nine months 2025 | First nine months 2026 |
|---|---|---|
| Net income | 56.478 | 113.587 |
| Depreciation, content amortization, lease-asset expense, and other amortization | +46.285 | +59.882 |
| Share-based compensation | +15.070 | +15.476 |
| Removal of non-operating income, net | -14.187 | -68.319 |
| Deferred-tax adjustment | +10.648 | +35.522 |
| Operating asset and liability changes, calculated | -29.239 | -42.307 |
| Operating cash flow | 85.055 | 113.841 |
Calculation notes: The $59.882 billion amortization line has a wider scope than the $41.845 billion of property-and-equipment depreciation and amortization disclosed by segment. They must not be substituted for each other or used to estimate an undisclosed maintenance-spending amount.
| Cash-balance reconciliation, US$ billion | First nine months 2026 |
|---|---|
| Opening cash, equivalents, and restricted cash | 90.106 |
| Operating cash flow | +113.841 |
| Investing cash flow | -257.099 |
| Financing cash flow | +111.848 |
| Currency effect | +0.018 |
| Closing cash, equivalents, and restricted cash | 58.714 |
Calculation notes: Closing cash comprises $55.783 billion of unrestricted cash and equivalents, $0.363 billion of current restricted cash, and $2.568 billion of noncurrent restricted cash. The separate $114.226 billion liquidity measure adds $58.443 billion of marketable securities to unrestricted cash and equivalents; it excludes restricted balances. The nine-month free-cash-flow calculation is $113.841 billion − ($175.670 billion − $3.482 billion) = negative $58.347 billion.
Source: Q3 2026 Form 10-Q, cash-flow statement and Notes 1, 2, and 8.
Note D. Checking the larger balance sheet and equity
Calculation notes: The table groups the balance sheet without treating all liabilities as borrowing. “Other long-term liabilities” includes deferred taxes, financing obligations, advance customer payments, tax contingencies, and content-related obligations. Future taxes can build up when investment gains are recognized before the investments are sold. Alongside the deferred-tax adjustment in Note C, the equity statement records substantial tax charges on investment gains held outside net income. These disclosures show substantial tax effects, although the filing does not reconcile every component of the $63.873 billion increase in other long-term liabilities. Those tax entries are separate from borrowing proceeds.
| Consolidated balance sheet, US$ billion | December 31, 2025 | September 30, 2026 |
|---|---|---|
| Current assets | 229.083 | 255.100 |
| Property and equipment, net | 357.025 | 508.862 |
| Operating lease assets | 86.054 | 96.910 |
| Goodwill | 23.273 | 23.743 |
| Other assets | 122.607 | 358.775 |
| Total assets | 818.042 | 1,243.390 |
| Current liabilities | 218.005 | 257.982 |
| Long-term lease liabilities | 87.339 | 98.824 |
| Long-term debt, excluding current portion | 65.648 | 173.125 |
| Other long-term liabilities | 35.985 | 99.858 |
| Total liabilities, calculated | 406.977 | 629.789 |
| Shareholders’ equity | 411.065 | 613.601 |
| Total liabilities and equity | 818.042 | 1,243.390 |
Calculation notes: “Other assets” grew by $236.168 billion, with the investment holdings discussed in section 4 explaining most of that increase. Capitalized video and music costs also rose from $21.3 billion to $22.5 billion. Acquired intangibles were $9.197 billion net at year-end 2025 and sit within other assets; the Q3 filing does not separately update that total. Goodwill increased by $470 million. These categories are distinct from the cloud equipment in property and equipment.
Sources: Q3 2026 Form 10-Q, balance sheet and Notes 1–2; 2025 Form 10-K, Note 1, other long-term liabilities, and Note 5, acquired intangibles.
| Shareholders’ equity reconciliation, US$ billion | Amount |
|---|---|
| December 31, 2025 equity | 411.065 |
| Increase in common-stock account | +0.001 |
| Increase in additional paid-in capital from compensation and employee-plan stock | +14.900 |
| Change in treasury stock | 0.000 |
| Other comprehensive income, after tax | +74.048 |
| Net income added to retained earnings | +113.587 |
| September 30, 2026 equity | 613.601 |
Calculation notes: Retained earnings increased from $250.536 billion to $364.123 billion; additional paid-in capital increased from $140.024 billion to $154.924 billion. Treasury stock remained negative $7.837 billion. Accumulated other comprehensive income rose from $28.230 billion to $102.278 billion: negative $1.670 billion currency translation, positive $0.263 billion investment-hedge effects, and positive $75.455 billion net available-for-sale investment effects reconcile the increase. All those equity changes are after tax where applicable. The employee-compensation equity entry differs from the income-statement compensation expense and is not a cash share sale.
Source: Q3 2026 Form 10-Q, Note 6, pp. 19–22.
This analysis is for information and education, not investment advice. Management forecasts are identified as forecasts; business interpretations and calculated measures are distinguished from reported results.