Amazon's AWS growth accelerates to 39%, but net income dips 2.4% as capex nearly doubles

AWS revenue growth nearly doubled year-over-year, from 20% to 39% in Q3 and from 18% to 35% for the nine months. This is a significant acceleration in the company's highest-margin segment.

Capital expenditures more than doubled year-over-year, driven by technology infrastructure investments to support AWS growth. The company expects capex to meaningfully increase again in 2027.

Free cash flow turned negative at $(42.4) billion for the trailing twelve months, down from positive $14.8 billion a year earlier, as capital expenditures outpaced operating cash flow growth.

Amazon disclosed a new $50 billion investment in OpenAI's Series C Preferred Stock, including $21.3 billion in Q3 2026, plus an additional $10 billion in Anthropic nonvoting preferred stock. This is a major strategic capital allocation.

Consolidated operating income rose 61% year-over-year in Q3 and 44% for the nine months, driven by strong AWS performance and North America margin expansion.

Interest expense more than tripled year-over-year in Q3 and more than doubled for the nine months, reflecting new debt issuances to fund the company's aggressive investment program.

The income tax provision more than doubled to $33.9 billion, driven by a $15.2 billion discrete tax expense from Anthropic investment gains. This is a below-the-line driver of the net income decline despite higher operating income.

Q4 2026 guidance implies 12-16% revenue growth, an acceleration from the 10-13% guided a year earlier, reflecting continued momentum in AWS and advertising.

The current filing adds a new disclosure about energy contracts that are accounted for as derivatives, including the quantity and duration of these contracts. This is a new disclosure not present in the baseline.

The current filing shows a significant increase in AWS performance obligations from $200 billion to $578 billion, and the weighted-average remaining life increased from 3.8 years to 6.1 years. This reflects new large customer commitments.

The current filing discloses a new $100 billion expansion of the OpenAI commitment, which is a major new customer contract for AWS.

The current filing discloses a new $100 billion expansion of the Anthropic commitment, another major new customer contract for AWS.

The current filing shows a significant change in marketable equity securities valuation gains/losses, with a loss of $653 million in Q3 2026 compared to a gain of $220 million in Q3 2025. This is likely due to changes in the fair value of investments.

The current filing shows a massive increase in upward adjustments relating to equity investments in private companies, from $7.3 billion to $62.9 billion for the nine months ended September 30, 2026. This is primarily due to the increase in the fair value of Anthropic preferred stock.

The current filing shows a reclassification adjustment of $4.5 billion for the nine months ended September 30, 2026, compared to $5.6 billion in the prior year. This is related to the conversion of Anthropic convertible notes.

All categories of receivables increased significantly, with customer receivables up from $38.0 billion to $52.6 billion and vendor receivables up from $12.5 billion to $28.8 billion. This reflects growth in the business.

Video and music expense increased from $5.5 billion to $5.9 billion in Q3 and from $15.7 billion to $18.8 billion for the nine months, reflecting increased content spending.

Amazon significantly expanded its relationship with Anthropic, adding a $5.0 billion preferred stock investment, a $20.0 billion financing facility, and amended cloud services agreement. This represents a major new capital commitment and strategic partnership.

Amazon disclosed a new $50.0 billion total investment in OpenAI, including a $15.0 billion initial purchase and a $35.0 billion commitment, alongside a commercial agreement for AWS cloud services. This is a major new strategic investment.

The fair value adjustment on Anthropic nonvoting preferred stock increased dramatically, from $7.2 billion in the prior year to $62.8 billion for the nine months ended September 30, 2026. This reflects significant valuation increases in Anthropic's funding rounds.

The carrying value of private company equity investments surged from $16.0 billion to $143.7 billion, driven by the new Anthropic and OpenAI investments and fair value adjustments. This represents a massive increase in Amazon's exposure to AI startups.

The fair value of Anthropic convertible notes increased from $23.7 billion to $146.2 billion, with unrealized gains rising from $18.8 billion to $140.3 billion. This reflects both additional investments and significant valuation increases.

Operating lease costs increased significantly year-over-year, from $3,593 million to $4,288 million for the quarter and from $10,259 million to $12,323 million for the nine months. This reflects Amazon's continued expansion of its fulfillment and data center footprint.

Total gross lease liabilities increased from $117,077 million to $139,447 million, driven by higher operating lease obligations. This indicates continued investment in leased infrastructure.

Amazon announced a definitive agreement to acquire Globalstar for approximately $10.9 billion including debt, with closing expected in 2027 subject to regulatory approvals and satellite milestones. This is a major new strategic commitment not present in the prior year's filing.

Total contractual commitments more than doubled from $376 billion to $883.6 billion, driven by increases across all categories, especially long-term debt, leases, and property and equipment. This reflects Amazon's significant expansion of capital and operating commitments.

Amazon issued $37 billion of notes in March 2026, along with several other large debt issuances during the year, significantly increasing its long-term debt. This is a major financing activity not present in the baseline.

Amazon entered into a new $17.5 billion term loan, drawn in September 2026, adding to its debt obligations. This is a new financing arrangement not disclosed in the prior year.

Amazon disclosed a new secured loan facility of up to $80 billion for technology infrastructure purchases, a significant new financing arrangement not present in the baseline.

Amazon added several new legal proceedings, including patent infringement claims by Xockets and antitrust complaints by the FTC and state attorneys general. These are new litigation risks not disclosed in the prior year.

The disclosure about the Italian Competition Authority fine and subsequent appeal was removed from the current filing. This may; the risk factor was not repeated in this quarter's Item 1A (which presents material changes from the 10-K); the 10-K risk factor still stands unless expressly withdrawn.

The amount of income tax contingencies excluded from commitments increased from $5.9 billion to $7.3 billion, indicating a rise in uncertain tax positions.

Total stock-based compensation expense increased in Q3 2026 to $5,406 million from $4,847 million in Q3 2025, and for the nine months to $15,476 million from $15,070 million. The increase is driven by higher technology and infrastructure expense, which rose to $0.0M in Q3 2026 from $0.0M in Q3 2025.

The income tax provision more than doubled from $14.1 billion to $33.9 billion, driven by a massive increase in discrete tax expense from $354 million to $15.2 billion, primarily due to upward adjustments to Anthropic investments. This is a significant below-the-line item affecting net income.

This is a positive development for cash flow.

The entire paragraph about the Indian tax authority dispute has been removed from the current filing. This could indicate the matter has been resolved or is no longer considered material, but the removal of a previously disclosed ongoing tax dispute is notable.

North America operating income increased significantly in Q3 2026 to $8,723 million from $4,789 million in Q3 2025, and for the nine months to $26,113 million from $18,147 million. This reflects strong revenue growth and operating leverage.

AWS operating income grew substantially, with Q3 2026 at $17,773 million versus $11,434 million in Q3 2025, and nine-month figures rising from $33,141 million to $48,555 million. AWS remains the most profitable segment.

AWS net sales increased from $33,006 million in Q3 2025 to $45,984 million in Q3 2026, and from $93,146 million to $125,803 million for the nine months. This represents accelerating growth in the cloud business.

Total consolidated assets increased dramatically from $727,921 million at September 30, 2025 to $1,243,390 million at September 30, 2026, driven primarily by a surge in AWS segment assets from $1.2M to $1.2M and corporate assets from $1.2M to $1.2M.

AWS property and equipment, net nearly doubled from $165,106 million to $313,009 million, reflecting massive capital investment in cloud infrastructure.

AWS net additions to property and equipment more than doubled, from $28,301 million in Q3 2025 to $57,116 million in Q3 2026, and from $64,808 million to $147,236 million for the nine months. This indicates aggressive expansion of AWS infrastructure.

AWS depreciation and amortization expense increased significantly, reflecting the larger asset base from heavy capital expenditures.

The current filing adds 'and other technologies including artificial intelligence' to the sentence about competitive entry, reflecting the growing role of AI in lowering barriers to competition. This is a disclosure update rather than a new risk, but it signals management's recognition of AI as a competitive force.

The current filing explicitly calls out automation, artificial intelligence, and machine learning technologies as examples of newer activities where profitability may not meet expectations. This adds specificity to the existing risk disclosure and highlights the scale of AI-related investments.

The current filing adds 'including by use of developing technologies such as artificial intelligence' to the security risk disclosure, acknowledging that AI can be used to circumvent security measures. This is a new disclosure that reflects evolving threat landscape.

The current filing adds '(including for artificial intelligence and machine learning technologies)' to the talent competition risk, highlighting the specific competition for AI/ML talent. This is a disclosure update that reflects the increasing importance of AI skills.

The current filing adds a specific example of tax challenges in Italy, which was not present in the baseline. This is a new disclosure that provides more granularity on regulatory risks.

The current filing adds 'and issue notes in foreign currencies' and 'foreign-denominated note balances and payments' to the foreign exchange risk disclosure, reflecting the company's use of foreign currency denominated debt. This is a substantive addition that expands the scope of the risk.

The current filing broadens the network access risk to include 'systems, and services' and 'divert customers from or charge fees to access our stores and service offerings', which is a more comprehensive description of the risk. This is a substantive edit that expands the scope.

The current filing adds '(including our technology infrastructure)' and 'adopting and utilizing artificial intelligence and machine learning technologies' to the expansion strain risk, highlighting the additional complexity from AI/ML adoption. This is a substantive edit.

The current filing adds 'artificial intelligence technologies' and 'other communication technologies' to the list of third-party technology uses, reflecting the company's increasing reliance on AI tools. This is a substantive edit.

The current filing adds '(including for artificial intelligence and machine learning technologies)' to the talent competition risk, highlighting the specific competition for AI/ML talent. This is a disclosure update that reflects the increasing importance of AI skills.

The current filing adds a specific example of tax challenges in Italy, which was not present in the baseline. This is a new disclosure that provides more granularity on regulatory risks.

The current filing adds 'and issue notes in foreign currencies' and 'foreign-denominated note balances and payments' to the foreign exchange risk disclosure, reflecting the company's use of foreign currency denominated debt. This is a substantive addition that expands the scope of the risk.

The current filing broadens the network access risk to include 'systems, and services' and 'divert customers from or charge fees to access our stores and service offerings', which is a more comprehensive description of the risk. This is a substantive edit that expands the scope.

The current filing adds '(including our technology infrastructure)' and 'adopting and utilizing artificial intelligence and machine learning technologies' to the expansion strain risk, highlighting the additional complexity from AI/ML adoption. This is a substantive edit.

The current filing adds 'artificial intelligence technologies' and 'other communication technologies' to the list of third-party technology uses, reflecting the company's increasing reliance on AI tools. This is a substantive edit.

The current filing adds '(including for artificial intelligence and machine learning technologies)' to the talent competition risk, highlighting the specific competition for AI/ML talent. This is a disclosure update that reflects the increasing importance of AI skills.

The current filing adds a specific example of tax challenges in Italy, which was not present in the baseline. This is a new disclosure that provides more granularity on regulatory risks.

The current filing adds 'and issue notes in foreign currencies' and 'foreign-denominated note balances and payments' to the foreign exchange risk disclosure, reflecting the company's use of foreign currency denominated debt. This is a substantive addition that expands the scope of the risk.

The current filing broadens the network access risk to include 'systems, and services' and 'divert customers from or charge fees to access our stores and service offerings', which is a more comprehensive description of the risk. This is a substantive edit that expands the scope.

The current filing adds '(including our technology infrastructure)' and 'adopting and utilizing artificial intelligence and machine learning technologies' to the expansion strain risk, highlighting the additional complexity from AI/ML adoption. This is a substantive edit.

The current filing adds 'artificial intelligence technologies' and 'other communication technologies' to the list of third-party technology uses, reflecting the company's increasing reliance on AI tools. This is a substantive edit.