Amazon fell more than 6% in extended trading Thursday over a seven-cent earnings miss, which is the wrong thing to sell it for. In the third quarter the company spent $77.3 billion on equipment against $42.4 billion of operating cash flow, and it issued $48.1 billion of long-term debt in the same three months.
Amazon publishes free cash flow only for the trailing twelve months, so the coverage we read repeated the $42.4 billion outflow and stopped there. The quarter on its own was an outflow of $33.5 billion, against an inflow of $1.3 billion a year earlier. This is the arithmetic from the cash-flow statement in Amazon’s release, using the company’s own definition: operating cash flow minus purchases of property and equipment, net of proceeds from sales and incentives.
The Quarter, Isolated
| US$ millions | Q3 2025 | Q3 2026 |
|---|---|---|
| Operating cash flow | 35,525 | 42,422 |
| Purchases of property and equipment | (35,095) | (77,259) |
| Proceeds from sales and incentives | 867 | 1,381 |
| Free cash flow | 1,297 | (33,456) |
| Long-term debt issued | none | 48,102 |
| Interest expense | 538 | 1,691 |
Equipment purchases rose 120% while operating cash flow rose 19%. A year ago operating cash covered 101% of the spending. Now it covers 55%.
CNBC’s Kate Rooney told viewers Friday morning that free cash flow dropped by another “$42 billion roughly in the quarter.” That is the twelve-month figure. In the quarter itself the trailing outflow widened by $34.8 billion, from $7.6 billion to $42.4 billion.
What the Seven-Cent Miss Hides
Earnings of $1.89 a share trailed the $1.96 LSEG estimate, and revenue of $201.94 billion trailed $202.31 billion, CNBC reported. Under those lines the operating business had its best quarter. Operating income rose 61% to $28.1 billion at a 13.9% margin, the highest Amazon has reported, and AWS grew 39% to $46.0 billion with $17.8 billion of operating income, up from $11.4 billion. Net income still slipped 2% because the year-earlier quarter held a $9.5 billion pre-tax gain on Anthropic.
The scrutiny belongs further down the income statement. Interest expense tripled to $1.69 billion. Long-term debt stands at $173.1 billion, up from $65.6 billion on December 31. AWS’s quarterly operating income covers 23% of the quarter’s equipment purchases, and the release does not break the $77.3 billion out by segment, so nobody outside Amazon can see what the AWS share returns.
We think that trade is defensible for as long as AWS keeps growing near 40%, which is what Andy Jassy projects for 2027 and 2028 (“over 40%”). It stops being defensible if growth fades before the debt does, because interest is a fixed charge and cloud demand is not.
A $220 Billion Guide That Implies a Cliff
Amazon held its 2026 cash capital expenditure guidance at about $220 billion. Purchases through nine months were $175.7 billion, which leaves $44.3 billion for the fourth quarter, or $47.8 billion if the guidance is net of proceeds. The release does not say which. Either way, the fourth quarter would run 37% to 43% below the third, and only 12% to 24% above the roughly $39 billion of a year earlier, after growth of 120% in the third.
Jassy told analysts Amazon will “spend meaningfully more in 2027” while AWS is still accelerating. Both cannot hold. We think the $220 billion is the figure that gives: third-quarter purchases landed $18.6 billion above the $58.7 billion FactSet estimate, and a company growing its cloud 39% is the last one to cut orders by 40% in a quarter.
What February Has to Show
Fourth-quarter sales guidance of $240 billion to $247 billion has a midpoint below the $244.5 billion consensus, and operating income is guided to $28.5 billion to $33.5 billion against $25.0 billion a year ago. Amazon is the third hyperscaler this month to print negative free cash flow, after Meta and Alphabet, the borrowing pattern Morgan Stanley sketched in June.
The February report settles two things. If fourth-quarter purchases come in near $45 billion, the guide held and the spending story has peaked. If they stay near $75 billion, the guide was a floor, and long-term debt keeps climbing from $173 billion.