Amazon Burns $42 Billion in Cash Chasing AI Growth as AWS Surges 39% and Shares Slide

Amazon has burned through $42.4 billion in cash over the past year in its race to build the infrastructure for artificial intelligence, and on Thursday investors delivered their verdict: shares in the world’s largest online retailer fell sharply after the company reported third-quarter results that paired the fastest cloud growth in nearly five years with a cash drain that is now impossible to ignore.

According to Amazon’s own earnings release, published after markets closed on Thursday 29 October, free cash flow swung to an outflow of $42.4 billion for the twelve months to the end of September. A year earlier, the same measure stood at a positive $14.8 billion. The reversal, the company said, was driven primarily by a $94.8 billion year-on-year increase in purchases of property and equipment, net of proceeds from sales and incentives, an increase that “primarily reflects investments in artificial intelligence”.

The market reaction was swift. Amazon shares had already fallen 4.3% in regular trading on Thursday to close at $243.79, and dropped as much as 7% in extended trading after the numbers were released, according to Reuters. By Friday morning, the stock was down about 6.9% in premarket trading, according to Barron’s, extending a sell-off in technology shares that began earlier in the week.

What made the reaction striking was that the underlying business, in many respects, performed well. Amazon Web Services, the cloud division that has become the company’s profit engine, grew revenue by 39% year on year to $46.0 billion, its fastest pace in nearly five years and ahead of the $45.61 billion analysts had expected, according to data compiled by LSEG and cited by Reuters. Operating income across the group rose to $28.1 billion, from $17.4 billion a year earlier, and the operating margin of 13.9% was the highest Amazon has ever reported, according to the company’s release.

Yet none of that was enough. The third-quarter report landed, in the words of Jesse Cohen, a senior analyst at Investing.com quoted by Reuters, as “a double disappointment”: the cash burn on one side, and a cautious outlook for the holiday quarter on the other. Amazon forecast fourth-quarter revenue of between $240 billion and $247 billion. The midpoint of $243.5 billion came in slightly below the $244.51 billion consensus estimate compiled by LSEG, according to Reuters.

Chief executive Andy Jassy moved quickly to reassure investors on the earnings call. “Our strategy is working and I expect it will for the foreseeable future,” he said, according to Reuters. He added that Amazon Web Services could reach a trillion dollars in revenue in as little as five years, and that the company’s investment in the division’s “functionality and infrastructure is working”. In the company’s own release, Jassy went further still: “There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years.”

Whether investors believe him will determine how the next phase of the artificial intelligence boom is financed, and by whom. Amazon is no longer an outlier. It is the latest, and in cash terms the largest, of the big technology companies to report that the cost of building AI capacity is consuming the cash its core businesses generate. The question now hanging over the sector is whether the returns arrive fast enough to justify the spending, or whether the industry is building capacity ahead of the demand that would pay for it.

The numbers behind the sell-off

Amazon’s third-quarter results, for the three months to 30 September, contained both a strong operating performance and a deteriorating cash position, and the tension between the two explains the market’s response. Total net sales rose 12% to $201.94 billion, from $180.17 billion a year earlier, according to the company’s release. That fell just short of the $202.31 billion consensus compiled by LSEG, according to Reuters.

Net income slipped to $20.7 billion, or $1.89 per diluted share, from $21.2 billion, or $1.95 per share, in the same quarter of 2025. The decline was driven primarily by a $9.5 billion pre-tax gain recorded in the third quarter of 2025 from Amazon’s investments in Anthropic, the artificial intelligence company behind the Claude models, according to the earnings release. Without that one-off gain a year ago, the earnings comparison would have looked very different, but the headline figures still missed Wall Street’s expectations of $1.96 to $1.97 per share, according to Reuters.

The segment detail showed where the growth is coming from, and where it is not. North America segment sales rose 6% year on year to $112.9 billion, according to the release, while international sales rose 5% to $43.1 billion. Amazon Web Services contributed $46.0 billion, up 39%, and generated $17.8 billion of operating income, against $11.4 billion a year earlier. That single division accounted for roughly 63% of the group’s total operating income of $28.1 billion, according to the Motley Fool’s analysis of the figures.

Advertising, long one of Amazon’s fastest-growing and highest-margin businesses, disappointed. Advertising sales rose just 12% to $19.6 billion, below the 18% growth analysts had expected, according to Reuters, and the first time the division had missed estimates in seven quarters. Growth had been 26% in the second quarter and 22% in the third quarter of last year. Jassy told analysts he was “pleased” with the advertising performance and attributed part of the slowdown to the timing of Prime Day, which moved into the second quarter this year after falling entirely in the third quarter of 2025, according to Reuters. He forecast a return to “high teens” advertising growth in the current quarter.

The retail business itself also showed signs of strain. Online store revenue rose just 2% to $68.5 billion, the slowest growth since early 2023, according to the Seoul Economic Daily’s account of the results. Amazon said that excluding the Prime Day timing shift, total third-quarter growth would have been approximately 400 basis points higher, according to its release, but the underlying picture remains one of a maturing e-commerce market in which the company must work harder for each additional dollar of sales.

The cash flow statement told the story investors focused on. Operating cash flow for the trailing twelve months rose 29% to $168.3 billion, according to the release. That is a formidable figure, and it is the reason Amazon can sustain its spending at all. But net capital expenditure over the same period reached $210.7 billion, according to the Seoul Economic Daily’s analysis of the filing, leaving free cash flow at negative $42.4 billion. In the third quarter alone, Amazon spent $77.26 billion on property and equipment, about $20 billion above estimates compiled by LSEG, according to Reuters, while operating cash flow in the quarter was $42.4 billion, leaving a quarterly free cash flow deficit of about $33.5 billion, compared with a surplus of about $1.3 billion a year earlier, according to the analysis published by The Lec.

It was the second consecutive quarterly deficit. Amazon reported negative free cash flow of $7.6 billion in the second quarter, according to the Seoul Economic Daily, meaning the shortfall widened roughly sixfold in three months. “The free cash flow looks like the ugly part of the report,” Dave Wagner, a portfolio manager at Aptus Capital Advisors, told Reuters. “Operations generated plenty of cash but their capex just absolutely swallowed it.” Wagner added: “The trend is pretty steep and pretty negative, and that’s the big thing that is alarming in this report.”

AWS: the fastest growth in nearly five years

If the cash burn was the ugly part of the report, Amazon Web Services was unambiguously the bright spot. Revenue growth of 39% was the division’s sharpest increase since the fourth quarter of 2021, according to the Seoul Economic Daily, and the sixth straight quarter of accelerating growth. The division is now running at a $184 billion annualised revenue run rate, according to Amazon’s release, and Jassy told analysts he expects AWS to grow by more than 40% in both 2027 and 2028.

The demand is being driven, in large part, by artificial intelligence. Amazon said its Bedrock inference service saw spending by Fortune 500 companies rise nearly sevenfold year on year, with total Bedrock token volume growing nearly 17 times, according to the earnings release. During the quarter Amazon signed new AWS agreements with Meta, Nvidia, OpenAI, Salesforce, Oracle, Qualcomm, Verizon, ADP, Stripe, Accenture, Novo, Fanatics and Zoom, among others. Bedrock’s model selection was expanded to include OpenAI’s GPT-6 Astra, GPT-6 Sol and GPT-6 Luna models, Anthropic’s Claude Fable 5.1, Opus 5.5, Sonnet 5.5 and Haiku 5.5, Moonshot AI’s Kimi K3, SpaceXAI’s Grok 4.7 and Z.ai’s GLM 5.3.

The Motley Fool’s analysis of the results noted that artificial intelligence labs such as Anthropic are driving a significant part of the cloud growth, and that this is the future demand Amazon is counting on. The logic is straightforward: the companies building frontier AI models need enormous computing capacity, and they rent it from Amazon, Google and Microsoft. Every dollar of that demand shows up as AWS revenue growth. The problem is that supplying it requires Amazon to build data centres, buy chips and lay power infrastructure first, and to pay for it all up front.

Amazon also used the results to showcase the breadth of its newer businesses. It said its Lambda serverless offering had topped a $1 billion annualised revenue run rate; that its Alexa for Shopping assistant had been used by more than 400 million customers in the past twelve months, with interactions up 570% year on year; that it had begun offering paid rides in its Zoox autonomous robotaxis in Las Vegas and was testing in San Diego and Houston, with operations now in twelve American cities; and that its Amazon Leo low-earth-orbit satellite service was on track to begin initial service later this year, with AT&T signed as the first major American telecom provider to offer Leo connectivity to enterprise and public-sector customers, according to the release.

None of these ventures is yet large enough to move the group’s numbers. What matters for now is AWS, and AWS is growing faster than it has in years. The question is whether that growth can be sustained at a rate that justifies the capital being poured into it, and whether the customers driving it, many of them AI companies that are themselves burning cash, can keep paying.

The spending will not stop

Perhaps the most consequential line in Amazon’s report was not a number but a promise of more spending to come. The company reaffirmed that it expects to spend about $220 billion on capital expenditure in 2026, most of it directed at artificial intelligence infrastructure, according to Reuters and the company’s own guidance. That figure is up from the $200 billion investment plan announced in February and the $128 billion spent on capital projects across all of last year, according to the Motley Fool.

Jassy told analysts on the earnings call that capital expenditure in 2027 was expected to be “meaningfully more” than in 2026, according to Reuters, without providing specific figures. The company is, in other words, telling investors that the cash burn will get worse before it gets better, and asking them to trust that the returns will follow.

Amazon is funding the gap with debt. The company raised $48.1 billion in long-term debt during the quarter, according to the Motley Fool, and its total long-term debt rose from $65.6 billion at the end of 2025 to $173.1 billion. That is a near-tripling of the debt load in nine months, and it changes the character of the company. Amazon, long famous for funding its growth from the cash its operations generated, is now borrowing at scale to build data centres.

The borrowing is not, on its own, a sign of distress. Amazon generated $168.3 billion of operating cash flow over the past twelve months, and its credit remains strong. But the scale and speed of the increase illustrate how quickly the AI buildout is reshaping the finances of even the largest technology companies. As Barron’s noted, Microsoft issued $25 billion in debt on Thursday, the same day Amazon reported, and investors are beginning to ask how much more borrowing the market can bear.

The guidance for the final quarter of the year added to the caution. Amazon projected fourth-quarter revenue of $240 billion to $247 billion, or growth of 12% to 16% compared with the fourth quarter of 2025, according to the release. Operating income is expected to be between $28.5 billion and $33.5 billion, against $25.0 billion a year earlier. The revenue midpoint came in slightly below consensus, according to Reuters, and the downbeat outlook signals that American retailers could face a difficult holiday season, with consumers tightening budgets amid higher petrol prices and the rising cost of living, according to Reuters. The National Retail Federation predicted earlier this month a 4.2% rise in total American holiday season sales, according to Reuters, a forecast that now looks optimistic if Amazon’s caution proves warranted.

A sector-wide reckoning

Amazon’s report did not land in isolation. It arrived at the end of a week in which investors have abruptly repriced the entire artificial intelligence trade, and it deepened a sell-off that began a day earlier with Alphabet, the parent company of Google.

Alphabet reported on Wednesday that its own free cash flow had swung to a $9.07 billion outflow in the third quarter, its second consecutive quarterly deficit, after a $5.9 billion shortfall in the second quarter, its first since going public. Its shares fell 12% in Thursday’s regular session, according to Reuters, wiping roughly $500 billion off the company’s market value. The trigger was the disclosure that queries in Google’s AI Mode generate lower advertising revenue than traditional search, squeezing the profitability of the business that funds the AI buildout.

Meta Platforms, the owner of Facebook, also reported negative free cash flow for the third quarter, according to Barron’s. Of the largest companies to have reported, only Microsoft offered a positive cash story, generating $18.6 billion of free cash flow for the quarter, although that was still down from $25.7 billion in the prior year, according to Barron’s. Microsoft also lowered its own capital expenditure forecast, to $170 billion from $175 billion, according to Reuters, a small but telling contrast with Amazon and Alphabet, which maintained their spending plans.

Intel provided the week’s other shock. Its shares fell 23% in after-hours trading on Thursday, according to Reuters, after the chipmaker warned of flagging personal-computer revenue through the first half of next year, and said it did not expect positive free cash flow in 2027, describing it as an “investment year”, according to Barron’s. The soaring cost of memory chips is squeezing its personal-computer business, while the company struggles to ramp up supply to meet demand for AI servers.

The contagion spread beyond the companies reporting results. CoreWeave, the cloud company that has acted as a proxy for the riskiness of the AI trade because of its debt load, fell more than 6%, as did its peer Nebius Group, according to Barron’s. “Investors took a moment to examine whether the recent pace of tech valuations still made sense, given all of the spending on AI development that is hitting cash flows,” Paul Stanley, a managing director at the wealth management firm Arca, told Barron’s. “We are still in the very early stages of AI development, and pullbacks are par for the course.”

Amazon’s own report added a further wrinkle. Jassy dismissed concerns that AI shopping agents, which automate people’s purchasing, had affected advertising sales, and the company disclosed during the quarter that it had blocked Meta’s Muse agent from accessing its site to shop on customers’ behalf, according to Reuters. The episode is a small illustration of a much larger tension: the same AI agents that cloud providers are racing to serve are also a threat to the advertising and retail businesses that fund the race.

Analysis: Why It Matters

Amazon’s third-quarter results matter well beyond the company’s own share price, because they capture the central tension of the artificial intelligence era in a single set of numbers: extraordinary growth in the business that sells AI infrastructure, and an extraordinary cash cost in building it. Five points stand out.

1. Growth alone no longer satisfies investors

For most of the past three years, the market rewarded technology companies for growth in artificial intelligence almost regardless of cost. Revenue acceleration was the story, and capital expenditure was treated as evidence of ambition rather than as a claim on future returns. That bargain is now breaking down. Amazon delivered its fastest cloud growth in nearly five years, its highest operating margin ever, and a 29% rise in operating cash flow, and its shares still fell 7% after hours. The message is that investors have moved from asking “how fast are you growing?” to asking “when does this spending pay for itself, and what happens if it doesn’t?” It is a healthier question, but it is a much harder one for companies to answer, because the honest answer is that nobody yet knows. The discipline this imposes is welcome; the volatility it creates is the price of it.

2. The AI buildout is a bet that must arrive on schedule

Amazon’s decision to spend $220 billion this year, and “meaningfully more” next year, is a bet on a specific future: one in which demand for AI computing keeps growing at 40% a year, in which the customers renting that capacity remain able to pay, and in which the infrastructure being built today is not rendered obsolete by cheaper or more efficient technology tomorrow. Each of those assumptions is plausible, but none is certain. The history of technology is littered with capacity built ahead of demand, from fibre-optic networks in the late 1990s to data centres in earlier cycles. The difference this time is the scale: no previous buildout has consumed cash at this rate, and no previous one has been funded so heavily with debt. If the demand arrives as Jassy predicts, Amazon will own the infrastructure of the next decade and the spending will look visionary. If it arrives more slowly, the company will be left servicing an enormous debt load with data centres that earn less than they cost to build.

3. AWS now carries the whole company, and that concentration matters

Amazon Web Services generated 63% of the group’s operating income in the quarter, on less than a quarter of its revenue. That concentration has been growing for years, but the third-quarter numbers make it stark: the retail business that most people associate with Amazon is, in profit terms, a secondary business. The implication cuts both ways. On the one hand, AWS is a remarkable asset, growing at 39% with a $184 billion run rate and projected growth above 40% for two more years. On the other hand, the company’s fortunes now depend overwhelmingly on a single market, cloud computing, and within it on a single driver, artificial intelligence demand, much of it from AI companies whose own business models are unproven. The diversification that once protected Amazon, retail, advertising, subscriptions, devices, has narrowed into a bet on one division’s continued acceleration. That is not a criticism of the strategy; it is a statement of the risk it carries.

4. Debt has quietly become part of the AI story

The near-tripling of Amazon’s long-term debt, from $65.6 billion at the end of 2025 to $173.1 billion, deserves more attention than it has received. Amazon is not borrowing because it is in trouble; it is borrowing because it can, and because the alternative, slowing the buildout, would cede ground to competitors. But debt changes the incentives. A company funding growth from its own cash flow can afford to be patient. A company funding it from the bond market must keep convincing lenders, quarter after quarter, that the returns will come. The $48.1 billion raised in a single quarter is a measure of the bond market’s current confidence. If that confidence wavers, if rates rise, or if the AI demand story falters, the cost of funding the buildout rises with it. The AI boom has so far been discussed as a story about chips and models. It is also, increasingly, a story about credit.

5. The retail slowdown removes the cushion

The final point concerns the part of Amazon that is not about AI at all. Online store sales grew just 2%, advertising missed estimates for the first time in seven quarters, and the fourth-quarter outlook came in below consensus. In previous cycles, a strong retail business would have cushioned a period of heavy investment; the cash it generated would have funded the next venture. That cushion is thinning. Consumers are under pressure from higher living costs, and the e-commerce market itself is maturing. Amazon’s response, faster delivery, rural expansion, grocery growth, pharmacy, satellite internet, robotaxis, is to build new businesses, but each of those requires investment too. The company is, in effect, funding a generational bet on AI at precisely the moment its original business is growing more slowly. That does not make the bet wrong. It makes the margin for error smaller, and the next few quarters more consequential than any Amazon has reported in years.

What to Watch Next

1. The fourth-quarter results in late January: whether AWS growth holds above 40% as Jassy has projected for 2027, and whether free cash flow narrows or widens further, will show whether the buildout is beginning to pay for itself.
2. The 2027 capital expenditure figure: Jassy promised spending “meaningfully more” than 2026’s $220 billion without giving a number. The precise figure, when it comes, will be the clearest signal of how confident Amazon is in AI demand.
3. Advertising’s recovery: Jassy forecast a return to “high teens” advertising growth in the fourth quarter. If that does not materialise, it will suggest the slowdown is structural rather than a Prime Day timing effect.
4. The debt market’s verdict: watch Amazon’s borrowing costs and whether the company returns to the bond market in the coming months. The terms it secures will reveal how lenders view the AI spending spree.
5. The wider sector’s cash flow: Microsoft’s next report, and any change in Alphabet’s or Meta’s spending plans, will show whether Amazon is an outlier or the new normal for big technology. If more companies trim their plans, as Microsoft has begun to do, the industry’s AI investment peak may be closer than the current spending suggests.

Sources

• Amazon.com Announces Third Quarter Results — Amazon Investor Relations, 29 October 2026
• Amazon Sinks as AI Spending Surpasses Cloud Growth, Shares Drop — Reuters, via Global Banking & Finance Review, 29 October 2026
• Amazon and Intel Tank the AI Trade. The One Factor Linking Big Tech’s Underwhelming Earnings. — Barron’s, 30 October 2026
• Amazon Just Burned $42 Billion in Cash Chasing AI Growth. Is Wall Street Ignoring the Risk? — The Motley Fool, 30 October 2026
• Amazon’s Cash Burn Jumps Sixfold in Three Months — Seoul Economic Daily, 30 October 2026