Amazon COM Inc

Amazon's Q3 2026 net sales rose 12% to $201.9 billion and operating income rose to $28.1 billion from $17.4 billion, led by AWS sales growth of 39%. Net income fell slightly to $20.7 billion because last year's quarter included a large Anthropic-related gain. Capital spending and financing surged: Q3 cash capex was $75.9 billion, long-term debt rose to $173.1 billion, and trailing twelve-month free cash flow was negative $42.4 billion. Amazon guides Q4 net sales of $240-247 billion and operating income of $28.5-33.5 billion, and still expects about $220 billion of 2026 cash capex.

1. 1.AWS sales grew 39% to $46.0 billion in Q3 and AWS operating income rose to $17.8 billion from $11.4 billion; AWS remaining performance obligations were about $578 billion.
2. 2.Cash capex was $75.9 billion in Q3 versus $34.2 billion a year earlier, and Amazon expects it to increase meaningfully again in 2027.
3. 3.Long-term debt rose to $173.1 billion from $65.6 billion at year-end 2025, driven by note issuances in several currencies, a drawn $17.5 billion term loan, and a new loan facility of up to about $80 billion for infrastructure purchases.
4. 4.Trailing twelve-month free cash flow swung to negative $42.4 billion from positive $14.8 billion, despite operating cash flow rising to $168.3 billion.
5. 5.Amazon invested $50.0 billion in OpenAI preferred stock this year, including $21.3 billion in Q3, and holds a $15 billion remaining Anthropic facility; equity investments in private companies reached $143.7 billion.
6. 6.Q3 consolidated operating income rose 61% to $28.1 billion, but non-operating items swung from $10.7 billion of income to a $1.2 billion loss, and interest expense tripled to $1.7 billion.

1. 1.Debt and financing risk is more prominent: debt is up sharply, interest expense is rising, and Amazon expects further financing in 2026 with borrowing costs exposed to rates and market volatility.
2. 2.Free cash flow is negative on heavy AI infrastructure spending, with total commitments of $883.6 billion including $159.6 billion for property and equipment and $164.9 billion in leases not yet commenced.
3. 3.Concentrated, hard-to-value investments in Anthropic and OpenAI ($298.8 billion of equity, warrant and convertible investments in total) rely on Level 3 valuations and could be written down or swing earnings.
4. 4.New legal actions include an FTC and 22-state complaint over reserve prices in sponsored ad auctions, a Texas suit, and Xockets patent claims at the ITC targeting AWS GB200/GB300 offerings, alongside ongoing antitrust cases.
5. 5.Supply constraints, including for memory chips and semiconductors, and energy availability and pricing could limit AI infrastructure growth; long-dated energy contracts add fair-value volatility.
6. 6.Pending Globalstar acquisition (about $10.9 billion including debt) faces regulatory approval and satellite milestone conditions, and tax matters (including a $15.2 billion discrete tax expense and Luxembourg dispute) add uncertainty.