Amazon's cloud business grows 39%, but $42 billion in cash flows out: Is AI spending becoming too expensive?
Amazon's cloud business is growing at its fastest pace in nearly five years, but its massive AI spending spree is putting pressure on cash flows, which further raises questions about the cost of the technology race.
The company, in its quarterly report, declared that Amazon Web Services (AWS) revenue increased 39.3% year-on-year to $46 billion in the third quarter ended September 30, 2026, taking its annualised revenue run rate to $184 billion. However, the company's free cash flow turned negative, recording an outflow of $42.4 billion for the trailing 12 months, driven primarily by a year-over-year increase of $94.8 billion in property and equipment purchases, net of proceeds from sales and incentives.
“This increase primarily reflects investments in artificial intelligence,” the report said.
Amazon said the decline 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. The increase primarily reflected investments in artificial intelligence.
Amazon expects to spend $220 billion on capital expenditure this year, primarily on investments in artificial intelligence.
The company is seeking to strengthen its position in the global AI race through AWS, which remains the world's largest cloud computing provider, ahead of Microsoft Azure and Google Cloud.
"Our AWS investment in functionality and infrastructure is working, with over 39% year-over-year revenue growth in Q3 ($184 billion revenue run rate) and projected revenue growth rates of over 40% both in 2027 and in 2028," CEO Andy Jassy said.
The company is also expanding its proprietary AI chip business. Amazon said in July that its AI cloud and chips businesses each exceeded $25 billion in annual revenue run rates, representing triple-digit percentage growth.
Demand for its proprietary Trainium chips is “strong”, Jassy said on a call with analysts on Thursday. Amazon intends to make them more broadly available late next year.
Despite AWS's strong performance, Amazon's third-quarter results missed analyst expectations on revenue and profit.
The company recorded $201.9 billion in total revenue and $20.7 billion in profit in the third quarter, below FactSet estimates of $202.2 billion and $21.5 billion, respectively.
Revenue from advertising services also fell short, reaching $19.6 billion versus the expected $20.8 billion.
Net income declined from $21.2 billion in the year-ago quarter, primarily due to pre-tax gains of $9.5 billion from Amazon's investments in Anthropic in the third quarter of 2025.
For the fourth quarter, Amazon said it expects net sales to fall between $240 billion and $247 billion, representing a 12% to 16% increase from the year-ago period. Analysts were expecting $244.16 billion.
Amazon shares fell more than 7% in after-hours trading on Thursday following the results.
Sanchari Ghosh is an Assistant Editor at Mint with over 12 years of experience in journalism, specialising in personal finance, DLT & DeFi, geopolitics and foreign policy, with a particular emphasis on how these areas intersect. <br> She writes extensively about how money works in everyday life—helping readers navigate personal finance decisions. <br> As AI reshapes investing behaviour, capital is increasingly flowing into decentralized ecosystems, redefining how assets are managed, traded, and valued. She focuses on explaining how money flows within frameworks like Distributed Ledger Technology (DLT), DeFi protocols, and crypto markets—while also exploring what the future of money could look like in a trustless, programmable financial world. <br> She also focuses on immigration-related issues, simplifying complex topics around visas, passports, overseas financial planning, and the many practical challenges Indians face while moving or living abroad. <br> Alongside personal finance, Sanchari has a strong understanding of international politics, contemporary and historical conflicts, and global state decisions. She closely tracks how geopolitical developments influence economies, markets, and individual financial choices, bringing together finance and global affairs in her reporting. <br> She began her career as a desk editor, which gave her a strong foundation in news writing. Over time, her interest naturally shifted toward personal finance. Before joining Mint in 2020, she worked DNA, The Times of India, Outlook Money, BloombergQuint, and ETMoney. At Mint, she got an opportunity to expand her coverage to include immigration and geopolitical developments while continuing to closely follow personal finance trends and market movements.As a journalist, she is committed to accuracy, intellectual rigour, and fairness. <br> She is an English Major and her work took her across cities including Delhi, Mumbai, and Pune. Living independently from an early age gave her firsthand experience in managing life and money on her own. This practical exposure sparked her strong interest in personal finance. <br> Outside the newsroom, Sanchari is a sports enthusiast who regularly plays lawn tennis and squash. In her younger years, she was also a national-level badminton player.
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