Amazon.com Q3 Earnings Call Highlights

Key Points

• Amazon delivered strong third-quarter results: Revenue rose 12% year over year to $201.9 billion, operating income jumped 61% to $28.1 billion, and the operating margin reached a record 13.9%. The company forecast fourth-quarter sales of $240 billion to $247 billion and operating income of $28.5 billion to $33.5 billion.
• AWS growth accelerated on cloud and AI demand: AWS revenue increased 39.3% to $46 billion, with a $184 billion annualized run rate and $578 billion backlog. Amazon expects AWS growth above 40% in both 2027 and 2028, supported by rising demand for AI infrastructure, Bedrock and custom chips.
• Amazon is significantly increasing AI infrastructure spending: Third-quarter capital expenditures reached $75.9 billion, and full-year 2026 spending is expected to total approximately $220 billion, with further increases anticipated in 2027. Management also highlighted faster delivery, grocery expansion and growing pharmacy demand across the retail business.

Amazon.com NASDAQ: AMZN reported third-quarter 2026 revenue of $201.9 billion, up 12% from a year earlier, while operating income rose 61% to $28.1 billion. The company’s operating margin reached a record 13.9%, according to CFO Brian Olsavsky.

CEO Andy Jassy said results were led by continued acceleration at Amazon Web Services, growth in retail unit volumes and ongoing investment in artificial intelligence infrastructure. The company also forecast fourth-quarter net sales of $240 billion to $247 billion and operating income of $28.5 billion to $33.5 billion.

AWS Growth Accelerates on AI and Core Cloud Demand

AWS revenue totaled $46 billion in the quarter, rising 39.3% year over year and adding $3.8 billion sequentially. The cloud unit reached an annualized revenue run rate of $184 billion. AWS operating income was $17.8 billion, representing a 38.7% operating margin.

Jassy said AWS growth accelerated for a sixth consecutive quarter and reached its fastest pace in nearly five years. He cited demand for both traditional cloud computing and AI services, noting that AWS backlog stood at $578 billion and was growing at a triple-digit rate year over year.

“Almost as fast as we install capacity, customers are gobbling it up,” Jassy said, adding that Amazon was installing an AI accelerator about every 14 seconds.

The company said Amazon Bedrock, its managed service for accessing and building with foundation models, has become the fastest-growing multibillion-dollar service in AWS history. Fortune 500 companies spent nearly seven times more on Bedrock year over year, while total token volume increased nearly 17-fold, according to Jassy. Amazon recently added OpenAI models as well as managed versions of Kimi, GLM and SpaceX models to the platform.

Jassy also highlighted demand for the company’s custom chips. Revenue commitments for both Graviton and Trainium increased more than 20-fold year over year, while customers using Amazon custom silicon saved more than $2 billion during the quarter, he said. Amazon intends to make Trainium available outside AWS beginning in late 2027.

Looking ahead, Jassy said Amazon expects AWS to grow more than 40% in both 2027 and 2028 and believes the unit could become a trillion-dollar annual revenue business within five to 10 years. He said the outlook reflects visibility into customer commitments for large blocks of capacity, continued enterprise cloud migration and rising production use of AI inference.

Capital Spending Rises With AI Infrastructure Buildout

Amazon’s cash capital expenditures totaled $75.9 billion in the third quarter, primarily for AWS and AI infrastructure. The company continues to expect approximately $220 billion in cash CapEx for all of 2026, with the majority directed toward AWS, and Jassy said spending is expected to rise meaningfully in 2027.

Management said it sees the investment cycle as a long-term opportunity to expand revenue, free cash flow and return on invested capital. Jassy said the company continues to shorten the time needed for infrastructure investments to break even, though he said returns vary between core cloud and AI infrastructure.

Olsavsky said AWS profitability has benefited from capacity optimization, fixed-cost management, custom chips and networking investments. However, he noted that AI services currently have lower margins than the core AWS business, creating a mix-related pressure on overall margins. Component pricing also remains a headwind.

Jassy said Amazon’s ownership or long-term leasing of much of its data-center capacity, along with use of internally designed chips, provides structural cost advantages compared with cloud providers relying more heavily on colocation or “neocloud” arrangements.

Retail Margins, Faster Delivery and Grocery Expansion

Amazon’s North America revenue rose 6% to $112.9 billion, while International revenue increased 8% excluding foreign-exchange effects to $43.1 billion. Worldwide paid units grew 12%.

Results were affected by the timing of Prime Day. The sales event took place in the second quarter in most large markets this year, compared with entirely in the third quarter of 2025. Olsavsky said third-quarter year-over-year revenue growth would have been about 400 basis points higher excluding that timing change.

North America operating income totaled $8.7 billion, for a 7.7% margin, while International operating income was $1.6 billion, for a 3.7% margin. Amazon said it reduced overall cost to serve despite higher fuel and line-haul transportation costs, helped by inventory placement, shorter shipping distances and package consolidation.

Shipping costs increased 11% year over year, compared with 12% growth in units. Excluding fuel and line-haul inflation, shipping costs rose 8%, or about 400 basis points below unit growth, Olsavsky said.

Jassy said Amazon delivered more than 1.5 billion items to Prime members through same-day or overnight delivery during the quarter. Amazon Now, the company’s ultrafast delivery offering, is now available in more than 450 towns and cities, and the number of items ordered through the service rose tenfold year over year.

Grocery and everyday essentials also remained a focus. Fresh groceries and everyday essentials grew about three times faster than the rest of Amazon’s store and accounted for roughly half of units sold during the quarter. Customers using same-day perishable delivery bought about seven times more everyday-essential units than those who did not, management said.

Advertising, Pharmacy and Fourth-Quarter Outlook

Amazon Ads generated $19.6 billion in third-quarter revenue, up 12% year over year. Jassy said the growth rate was affected by Prime Day’s move to the second quarter, the timing of NBA programming on Prime Video and a comparison with changes to the company’s search-engine marketing programs a year earlier. He said Amazon expects advertising revenue growth to return to the high teens in the fourth quarter.

Amazon Pharmacy customers increased more than 60% year over year, with repeat customers rising more than 50%, Jassy said. The company now offers three-hour prescription delivery in more than 350 cities.

For the fourth quarter, Amazon expects foreign exchange to reduce year-over-year net-sales growth by approximately 60 basis points. Olsavsky also said fuel and line-haul inflation is expected to be higher in the fourth quarter than in the third.

Amazon Leo’s commercial service remains on track to begin initial service by year-end. The company expects to begin capitalizing certain Leo production and launch costs in the first quarter of 2027; as a result, it expects to continue expensing most Leo-related costs during the fourth quarter.

About Amazon.com (NASDAQ:AMZN)

Amazon.com, Inc is a global technology and e-commerce company founded by Jeff Bezos in 1994. Originally launched as an online bookstore, the company has expanded into a broad digital marketplace offering consumer products across numerous categories, including electronics, household goods, apparel, groceries and other merchandise. Amazon also sells products under its own brands and provides logistics, fulfillment and delivery services that support its retail operations and third-party sellers.

The company's principal businesses include online and physical retail, Amazon Web Services (AWS), digital advertising, subscription services and consumer technology.

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