Amazon Just Delivered a Record-Breaking Quarter. But There’s One Number Investors Shouldn’t Ignore. Vandita Jadeja Fri, November 6, 2026 at 11:33 AM EST 5 min read AMZN +0.99% MSFT -0.06% GOOG +1.52% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Amazon hit a record 13.9% operating margin, but a $42.4 billion trailing free cash outflow drove shares down 7% in premarket trading.
Microsoft's Azure grew 48% with a 47% operating margin, while Alphabet's cloud surged 103%, though equity gains inflate its earnings.
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Fresh results from Amazon (NASDAQ:AMZN) show an operating margin of 13.9%, the highest in its history. Even so, the stock was down 6.72% in Friday premarket trading at $227.40.
The number investors keep coming back to is a trailing 12-month free cash outflow of $42.4 billion, driven by AI infrastructure spending. Amazon's 24/7 Wall St. price target sits at $377.20. That means 54.72% upside from Thursday's close and 65.9% from the premarket level.
That is a high-conviction rating. The selloff reflects concerns about cash flow, while AWS demand looks as strong as it has in years.
Amazon shares are down 9.18% over the past week and 7.81% over the past month, and they are 1.48% lower year to date. The 52-week range runs from $196 to $287.20. CNBC reported that the stock fell in premarket trading as pressure mounted after earnings.
Third-quarter revenue came in at $201.94 billion, up 12.1% and slightly short of the $202.20 billion estimate. GAAP EPS of $1.89 missed consensus of $1.9579. Operating income, however, rose 61.2% to $28.08 billion.
AWS revenue grew 39% to $45.98 billion, its fastest pace in nearly five years. Capex reached $77.26 billion in the quarter, and full-year 2026 guidance went up to about $220 billion from $200 billion.
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The upside scenario reaches $425.16. The AWS backlog stands at $578 billion and is growing triple digits, while Bedrock token volume is up nearly 17 times. Management expects AWS to grow more than 40% in both 2027 and 2028. Q4 operating income guidance of $28.5 billion to $33.5 billion compares with $25 billion a year ago.
Wall Street agrees. Analysts count 16 Strong Buys, 43 Buys and zero Sells, with a consensus target of $332.41. CEO Andy Jassy said, "There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years."
The downside scenario lands at $316.96. Management plans to spend "meaningfully more in 2027," and debt and interest expense are both rising. CFO Brian Olsavsky also said, "We are not guiding at all on our margin for AWS."
Fuel and line-haul inflation will be higher in Q4. The capex has to be powered, cooled, and connected by somebody, and we rounded up seven suppliers riding that expansion in a free AI infrastructure report.
Operating cash flow also rose 19.4% to $42.42 billion, and management says AWS payback periods keep getting shorter. That suggests the outflow is investment spending, with the core business still generating cash.
AWS's closest cloud rival is Microsoft (NASDAQ:MSFT). With Azure up 48%, Microsoft trades at a lower trailing multiple with a far higher operating margin.
Also spending heavily on AI is Alphabet (NASDAQ:GOOGL), which posted free cash flow of -$9.065 billion. Its low P/E reflects earnings inflated by equity gains, including a $99 billion gain in Q2.
Our target is based on a forward P/E of 24. Measured against these peers, it looks reasonable.
The 24/7 Wall St. price target is $377.20, with a buy rating and 90% confidence.
The bull case strengthens if AWS keeps growing faster than 40% and the backlog turns into revenue. The bear case gains weight if 2027 capex rises while AWS margins slip. On balance, AWS demand outweighs the cash burn.
These are the model's base-case estimates, assuming Amazon's current growth path holds.
These estimates depend on Amazon continuing to execute. A sustained AI capex return could push the stock higher, and extended negative free cash flow could pull it lower.
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