Amazon (AMZN), Financial Analysis

1 Revenue & Business Model

• Storyline: AWS earns most operating income, retail and advertising bring most net sales, and the AI build out is funded with debt. AWS was 22.8% of Q3 2026 net sales against 18.3% a year earlier, and 63.3% of operating income. Chapters 2 to 4 cover the three revenue drivers: AWS, online stores and third party sellers, and advertising.
• Three segments in FY2025: North America $426.3bn of net sales (59.5%), 6.9% operating margin; International $161.9bn (22.6%), 2.9%; AWS $128.7bn (18.0%), 35.4%, and 57.0% of operating income of $80.0bn.
• Revenue by type FY2025: online stores $269.3bn, third party seller services $172.2bn, AWS $128.7bn, advertising $68.6bn, subscriptions $49.6bn, physical stores $22.6bn.
• Net sales FY2021 $469.8bn to FY2025 $716.9bn, a 11.1% CAGR; TTM Q3 2026 $797.5bn.
• Customer location FY2025: United States $489.7bn (68.3%), Germany $45.9bn, United Kingdom $43.2bn, Japan $30.7bn, rest of world $107.5bn (15.0%).
• Employees 1.638m at 30 Sep 2026, +3.8% year on year.

2 AWS: Backlog, Custom Chips and the AI Capacity Race

• AWS net sales $46.0bn in Q3 2026, +39.3%; operating income $17.8bn, 38.7% margin against 34.6% a year earlier. TTM net sales $161.4bn, +32.4%; TTM operating income $61.0bn, 37.8% margin. AWS was 22.8% of Amazon net sales and 63.3% of operating income in Q3 2026.
• Backlog $578bn at 30 Sep 2026 against $244bn at Dec 2025 and $200bn a year earlier; weighted average remaining life 6.1 years against 3.8 years a year earlier. OpenAI expanded its $38bn AWS commitment by $100bn over 8 years in Q1 2026; Anthropic expanded its commitment by more than $100bn over 10 years in Q2 2026.
• Custom chips: the chips business (Graviton, Trainium, Nitro) ran above a $25bn annual revenue rate in Q2 2026, against above $10bn for Trainium and Graviton in Q4 2025; OpenAI is to consume about 2 GW of Trainium from 2027 and Anthropic up to 5 GW. Stated on the call: most Bedrock inference runs on Trainium; external Trainium chip sales planned from late 2027.
• Capacity: AWS property additions $57.1bn in Q3 2026 and $147.2bn in 9M 2026, 74.8% of Amazon's $196.9bn (accrual basis incl. finance leases); AWS added 3.9 GW of power in 2025 and plans to double total power capacity by end of 2027 (2025 shareholder letter).
• Management run rates (8-K Ex 99.1): AWS annualized revenue $184bn in Q3 2026 against $169bn in Q2; AI business above a $25bn run rate in Q2 2026, growing at triple digit rates. The CEO projects AWS growth over 40% in both 2027 and 2028.

How cloud and AI infrastructure are changing

• Backlogs grow across large clouds: Microsoft commercial RPO $677bn (+73%, Sep 2026), Oracle RPO $664bn (Aug 2026), Amazon $578bn and Google Cloud $560.8bn (Sep 2026). Definitions differ.
• Growth rates differ: Google Cloud +102.6% in Q3 2026 and Azure +48.2% in the Sep 2026 quarter against AWS +39.3%; Oracle cloud infrastructure +120.7% (Aug quarter); Alibaba AI Cloud and Compute Services +45.0% (Jun quarter); CoreWeave revenue +112.5% (Q2 2026).
• AI developers buy from several clouds: Anthropic's S-1 lists minimum compute spend of $114.5bn with Google, $110.0bn with Amazon and $44.9bn with Microsoft. Amazon also holds equity in both labs: Anthropic at $238.7bn and OpenAI preferred at $50.0bn at 30 Sep 2026.
• Custom accelerators: Alphabet sells TPU systems to third parties from Q2 2026; Alibaba's Zhenwu chips are used by over 650 external customers (Jun 2026 quarter); Amazon's chips business ran above a $25bn rate in Q2 2026.
• Capex: Amazon TTM net capex $210.7bn, +81.8%; Alphabet $159.8bn (Q3 2026); Microsoft $135.9bn (Sep 2026); Oracle $75.7bn (Aug 2026). Amazon holds energy contracts of about 690m MWh under derivative accounting, with a weighted average of about 18 years remaining.

3 Online Stores and Third Party Sellers: Speed, Selection and Margin

• Online stores $68.5bn in Q3 2026, +1.6% (+2% excl. FX), and third party seller services $46.5bn, +9.4%, after +14.6% and +15.9% in Q2 2026, when Prime Day fell; the release puts the timing effect at about 400 bp on total net sales growth. TTM online stores plus third party seller services $473.8bn, +10.5%.
• Segment margins: North America operating income $8.7bn, 7.7% margin, against $4.8bn (4.5%) in Q3 2025, which included the $2.5bn FTC settlement; International $1.6bn, 3.7%, against 2.9%. TTM margins 8.2% and 3.3%.
• Units and costs: paid units +12%; third party sellers 61% of units; shipping costs $28.3bn, +11.5%; physical stores $5.7bn, +2.4%; subscription services $14.0bn, +11.4%.
• Delivery and shopping tools (8-K Ex 99.1): more than 1.5bn items arrived same day or overnight for Prime members in Q3 2026, and fresh groceries and everyday essentials were about half of all units sold; Amazon Now delivery in over 450 towns and cities, with items ordered up 10x; Alexa for Shopping used by over 400m customers in 12 months, with interactions +570%.

How retail and marketplaces are changing

• Marketplaces grow at different rates: MercadoLibre GMV +43.7% and Shopify GMV +31.6% (Q2 2026), eBay GMV +15.0% (Q3 2026); Alibaba China ecommerce customer management revenue fell 7% in the Jun 2026 quarter.
• Store based rivals push online: Walmart global eCommerce sales +23% in the quarter to Jul 2026, led by store fulfilled pickup and delivery and marketplace; Walmart US operating income $8.1bn, 6.5% margin; membership fee revenue +17%.
• Trade policy: the US suspended duty free de minimis treatment of low value imports for all countries from 29 Aug 2025 (US Customs and Border Protection); Amazon's Q3 2026 10-Q lists trade restrictions and tariff changes affecting China based sellers, whom it names as a source of third party seller services and advertising revenue, as a risk to operating results.
• Litigation: private class actions in the US, Canada and the UK allege anticompetitive pricing policies, Featured Offer selection, use of seller data and Prime structure; three UK class actions and one US class action are certified.

4 Advertising: Retail Media, Prime Video and AI Agents

• Advertising services $19.6bn in Q3 2026, +10.9% (+12% excl. FX), after +26% excl. FX in Q2 2026; stated on the call: Prime Day timing took 850 bp off growth. TTM $78.0bn, +20.7%, 9.8% of net sales. Q4 2026 guidance: growth in the high teens.
• Subscription services $14.0bn, +11.4% (+12% excl. FX). Prime Video sports inventory: Thursday Night Football averaged 17.7m viewers over six games in 2026, +16% on the prior season average; NBA on Prime started its second season in over 200 countries (8-K Ex 99.1).
• AI in ad buying: Amazon introduced Amazon Ads Agent and launched Full Funnel Campaigns in it for all US advertisers in Q3 2026, combining sponsored ads, display, video and streaming TV in one campaign.
• Regulation: in Aug 2026 the FTC with 22 state Attorneys General, and Texas separately, filed complaints alleging Amazon harmed advertisers through reserve prices in sponsored ad auctions; they seek injunctive relief and civil penalties.

How advertising is changing

• Retail media: Walmart global advertising +38.0% in the quarter to Jul 2026, incl. Walmart Connect +43% excl. VIZIO; eBay first party advertising +16.0% (Q3 2026); Amazon advertising +26.2% in Q2 2026 and +10.9% in Q3 2026.
• Social and search platforms, Q3 2026: Meta advertising +25.9% with impressions +10% and price per ad +14%; Google advertising +10.6% with paid clicks +8%; Reddit ad revenue +54.0%; Pinterest revenue +11.9%.
• Scale in Q3 2026: Google advertising $82.0bn, Meta advertising $63.1bn, Amazon advertising $19.6bn, Microsoft search and advertising $6.6bn (Sep 2026 quarter).

5 Financial Analysis & Ratios

• Operating margin 13.9% in Q3 2026 against 9.7% in Q3 2025, which carried the $2.5bn FTC settlement and $1.8bn of severance; TTM 13.1% against 11.2% in FY2025 and 2.4% in FY2022.
• Net income TTM $134.8bn, 16.9% of net sales, includes $69.5bn of other income, mainly Anthropic marks; the GAAP P/E of 19.4x reflects these gains.
• Capex TTM $210.7bn, 26.4% of net sales, against $128.3bn (17.9%) in FY2025 and $55.4bn in FY2021. Operating cash flow TTM $168.3bn, +28.8%; free cash flow ($42.4bn) TTM against $11.2bn in FY2025.
• Balance sheet at 30 Sep 2026: cash and marketable securities $114.2bn; debt $180.3bn carrying value, incl. the $17.5bn term loan; finance leases $14.5bn, financing obligations $9.7bn, operating leases $100.3bn; total assets $1.24tn against $818.0bn at Dec 2025.
• Capital returns: no dividends; no buybacks since $6.0bn in FY2022; $6.1bn of authorization remains.

Cost structure and profitability

• Cost of sales 46.8% of Q3 2026 net sales against 49.2% a year earlier, as AWS and advertising grew faster than online stores.
• Technology and infrastructure $34.8bn, +20.2%, 17.2% of net sales; it holds AWS infrastructure costs and depreciation. Depreciation and amortization in the cash flow statement $20.9bn, +24.7%.
• Fulfillment $30.0bn, 14.9% of net sales against 15.4%; shipping costs $28.3bn, +11.5%.
• Other operating expense $134m against $2.9bn in Q3 2025, which included the FTC settlement; interest expense $1.7bn against $0.5bn on new debt.
• Investment gains explain the gap between operating income and net income: other income $15.6bn in Q1 2026, $53.4bn in Q2 2026 and ($0.7bn) in Q3 2026; 9M 2026 net income $113.6bn against operating income $79.4bn; 9M 2026 tax $33.9bn incl. $15.2bn of discrete expense on these gains.
• Free cash flow as filed ($42.4bn) TTM. Amazon stopped presenting its two lease adjusted free cash flow measures after the FY2024 10-K; the measure less principal repayments of finance leases and financing obligations is computed here with Amazon's former formula: ($44.4bn) TTM and $9.3bn in FY2025.

6 MD&A & Management Commentary

Q3 2026 earnings call and results release

• Q3 2026 (29 Oct 2026): net sales $201.9bn, +12.1% (+13% excl. a $0.9bn FX headwind); operating income $28.1bn, +61.2%, above the guided $22.5bn to $26.5bn; diluted EPS $1.89 against $1.95; effective tax rate 23.0%.
• Segments: North America $112.9bn, +6.2%, 7.7% margin; International $43.1bn, +8% excl. FX, 3.7%; AWS $46.0bn, +39.3%, 38.7%. 9M 2026 AWS net sales $125.8bn, +35.1%.
• Stated on the call: AWS added $3.8bn of revenue against Q2; AI revenue grows at triple digit rates, with inference well over half; Bedrock spend by Fortune 500 customers nearly 7x year on year; Graviton and Trainium revenue commitments each up more than 20x; external Trainium chip sales planned from late 2027.
• Stated on the call: reserved capacity blocks range from hundreds of MW to about 1 GW, with visibility into 2027, 2028 and part of 2029; more than 1 million robots in the fulfillment network; 1.5bn items delivered same day or overnight to Prime members in Q3; about 85% of global IT spend still on premises (CEO).
• Stated on the call: shipping costs +11%, about 8% excluding fuel and line haul inflation; advertising growth carried an 850 bp Prime Day timing headwind; Amazon Leo costs mostly expensed in Q4 2026 before capitalization starts in Q1 2027.
• Q2 2026 call (30 Jul 2026), stated on the call: operating income $27.5bn incl. about $1.2bn of one time benefits (tariff refunds and an energy contract gain, about $0.6bn each); backlog $496bn; the CEO put 2026 capex at about $220bn against about $200bn, citing memory costs; plan to double 2025 power capacity by end of 2027.

Management and CFO commentary

• CFO Brian Olsavsky, Q3 2026 call (stated on the call): gave no AWS margin guidance and said the AI mix pressures margins; Q3 cash capex $75.9bn; 2027 capex to be meaningfully higher, with no figure.
• CFO, Q2 2026 call (stated on the call): about $1.2bn of one time benefits in Q2 operating income, mostly in AWS; AWS margin about 39%, up 650 bp year on year (520 bp excl. the energy contract gain); AWS margins will fluctuate; Amazon issued debt in 2026 and has many funding options.
• CFO, Q1 2026 call (stated on the call): Q1 operating margin 13.1%, the highest reported at that time; Q1 cash capex $43.2bn, mainly for AWS and generative AI; outbound shipping +12% and fulfillment +9% excl. FX against 15% unit growth; about $1bn higher Amazon Leo costs in Q2.
• CFO, 2026 annual meeting (20 May 2026): FY2025 free cash flow $11bn against $38bn in 2024; called free cash flow the most important long term financial metric.
• CEO Andy Jassy, 8-K Ex 99.1 of 29 Oct 2026: AWS grew over 39% to a $184bn run rate; projects AWS growth over 40% in both 2027 and 2028; says Amazon may have two trillion dollar revenue businesses in the next 5 to 10 years.
• CEO, 2025 shareholder letter (8-K Ex 99.1, 8 Apr 2026): customer commitments cover a substantial portion of 2026 AWS capex, much of it monetized in 2027 to 2028; free cash flow is pressured while capex growth outpaces revenue growth; Trainium at scale expected to save tens of billions of capex dollars per year.

7 Peer Valuation & Sector Summary

• Summary across drivers: Amazon's Q3 2026 net sales growth of 12.1% (about 16% excl. the Prime Day shift, per the company) sits below ORCL 29.6%, META 26.1%, GOOGL 24.7%, MSFT 18.8% and above WMT 5.9% (Jul quarter).
• Operating margin TTM: MSFT 47.1%, GOOGL 33.3%, META 32.9%, ORCL 32.1%, AMZN 13.1%; Amazon's margin includes low margin first party retail sales booked gross.
• Free cash flow margin TTM: MSFT 17.3%, META 10.4%, GOOGL 4.2%, AMZN (5.3)%, ORCL (40.0)%.
• Valuation: AMZN 3.3x EV/Sales and 19.4x P/E (about 32.8x excluding TTM investment gains, estimate) against MSFT 11.1x and 27.2x, GOOGL 7.0x and 14.7x, META 6.5x and 20.9x, ORCL 6.8x and 20.9x.

8 Material Events & Contracts

• 17 Forms 8-K from 30 Oct 2025 to 29 Oct 2026: five earnings releases, seven financing filings ($15.0bn notes in Nov 2025; $37.0bn and EUR 14.5bn in Mar 2026; the $17.5bn term loan and CAD 14.0bn in Jun 2026; $25.0bn in Jul 2026; GBP 4.25bn in Sep 2026), the OpenAI agreements, the 2025 shareholder letter, the Globalstar merger agreement, the annual meeting results and one director election.
• OpenAI (8-K of 27 Feb 2026): a $15.0bn initial Series C preferred purchase plus a $35.0bn equity commitment letter guaranteed by Amazon; $50.0bn invested by Q3 2026. OpenAI expanded its $38bn AWS agreement by $100bn over 8 years with about 2 GW of Trainium capacity; AWS is to be exclusive third party cloud distribution provider for OpenAI Frontier.
• Debt: long term debt proceeds $115.1bn in 9M 2026; long term debt face value $180.9bn at 30 Sep 2026, incl. $162.5bn of senior notes and the $17.5bn term loan; weighted average remaining life of the notes 13.9 years; $15bn revolver and $5bn short term facility undrawn; no commercial paper outstanding. Interest expense $1.7bn in Q3 2026 against $0.5bn.

9 Ownership, Voting Power & Annual Meeting

• One class of common stock, one vote per share (proxy statement); 10.81bn shares outstanding at 21 Oct 2026. Jeff Bezos holds 879.3m shares, 8.13%, after gifts in Aug 2026 (Form 4); no holder above 10%. Holders of 25% can call a special meeting; proxy access is in place.
• 2026 annual meeting (20 May 2026, virtual): all 11 directors elected with 90.0% to 99.3% of votes cast; say on pay 94.0% (78% in 2025, per the proxy); Ernst & Young ratified; all four shareholder proposals and one floor proposal rejected, the highest being data center climate reporting at 18.4% and an independent chair at 14.2%.
• Insiders, 12 months to Oct 2026: no open market purchases. Bezos sold 1,209,649 shares on 3 Aug 2026 at a weighted $286.41, about $346.5m, under a prearranged trading plan adopted 14 Nov 2025, and gifted about 2.7m shares to non profits. Six executives sold about 64,800 shares (about $16.8m) on 21 to 24 Aug 2026 after quarterly RSU vesting; sales on other vest dates are not totalled here.
• Board and pay: Kevin R. Mandia joined the board on 8 Sep 2026 (Audit and Security Committees). The proxy states no equity awards to the CEO or named executives in 2025; the CEO was last granted an award in 2021.

2026 annual meeting

• CFO review: FY2025 net sales $716.9bn, operating income $80bn, operating cash flow $140bn, cash capex $128.3bn, free cash flow $11bn; advertising $69bn, +22%.
• CEO remarks: AI revenue run rate above $15bn; chips business at a $20bn run rate growing at triple digit rates; Trainium commitments above $225bn; Amazon Leo with over 300 satellites in orbit, 20 launches planned in 2026 and 30 in 2027.
• Questions: on dividends the CEO said investing in AWS, retail infrastructure and Amazon Leo is the best long term use of cash, while staying open to other options; on third party chip sales he said it is possible later, though Trainium is largely committed.

10 Risk Factors

• Item 1A of the FY2025 Form 10-K holds 24 risk factors (8,567 words). 19 were compared in full with the FY2024 10-K and none was added, removed or materially reworded; the other 5 were checked against the Q3 2025 10-Q. The Q3 2026 10-Q keeps 24 factors (8,561 words); FY2024 totals are shown as n/a because that Item 1A was retrieved only in part.

How risk factors changed

• Comparison: 10-K FY2025 filed 5 Feb 2026 acc 0001018724-26-000004 against 10-K FY2024 filed 6 Feb 2025 acc 0001018724-25-000004 (first 19 of the factors compared in full; see notes).
• No risk factor was added or removed between the FY2024 and FY2025 10-K in the 19 factors compared, and all 24 headings are unchanged through the Q3 2026 10-Q.
• AI is named 13 times in the first 19 factors of the FY2025 10-K against 6 times in the same factors of the FY2024 10-K; across all 24 factors AI appears 16 times in 11 factors, against 9 times in 6 factors in the Q3 2025 10-Q.
• Tariff is named 8 times in the first 19 factors of the FY2025 10-K against 2 times in the FY2024 10-K, covering international trade, China based sellers, retail demand, inventory pricing and operating results.
• Edits in 2026 track transactions and disputes: investee control risk (Q1 2026, the quarter of the OpenAI investment), Italian tax challenges (Q1 2026), foreign currency notes (Q2 2026, after euro, Swiss franc and Canadian dollar note issues), and removal of the Indian cloud services tax example (Q3 2026).

11 Stock Price, Scenarios & Sensitivity

• AMZN closed at $240.35 on 30 Oct 2026, (1.4%) on the 29 Oct close of $243.79 after results, 16.3% below the 52 week high of $287.20 and 22.6% above the low of $196.00; +4.3% year to date.
• Valuation: 19.4x TTM diluted EPS of $12.37, which includes investment gains; about 32.8x excluding them (estimate); 3.3x EV/Sales; free cash flow yield (1.6%) on TTM free cash flow of ($42.4bn).
• Scenario model: net sales grow from TTM Q3 2026 $797.5bn for three years; operating margin as stated; no investment gains; 20% tax rate; price equals TTM Q3 2029 EPS times exit P/E.

Critical factors and core assumptions

• Revenue base TTM Q3 2026 $797.5bn; operating income $104.4bn (13.1% margin).
• Best case: 16% revenue CAGR, 19% operating margin, 34x P/E, share count +1.5%.
• Base case: 12% revenue CAGR, 15.5% margin, 28x P/E, share count +2%.
• Worst case: 7% revenue CAGR, 10.5% margin, 20x P/E, share count +3%.
• Tax rate 20% excluding discrete items; no investment gains or losses; net interest set to zero; no buybacks or equity issuance.

Scenarios, three years forward

Sensitivity analysis

Disclaimer

This analysis is for information only and is not financial advice. It is derived from public SEC filings retrieved via sec-api.io and is not a publication of the U.S. Securities and Exchange Commission. Scenario values are model outputs under stated assumptions and are not forecasts. Data as of 30 October 2026.

Sources

All company figures are read from SEC filings retrieved through the sec-api.io MCP server. Earnings call content is labelled as stated on the call and is taken from published coverage of the Q1, Q2 and Q3 2026 calls held by the company; Amazon files no call transcript or CFO commentary with the SEC.