Amazon third quarter 2026 earnings explained: segments, EPS and valuation multiples

Amazon reported its third quarter 2026 results on October 29, 2026. Net sales for the three months ended September 30 rose 0.7% from the quarter before and operating income rose 2.2% (Dalsna Finance calculation), but net income fell by about two thirds because the second quarter had been lifted by large gains on Amazon's investments in Anthropic. This article walks through what Amazon does, how each part of the business performed and what the numbers say about its valuation. Every figure is sourced and dated, and every number worked out by us is labelled as a Dalsna Finance calculation. ^[1][2]

Amazon in brief

Amazon.com, Inc. is based in Seattle. It is best known for its online stores and its Prime membership, and it also sells cloud computing to businesses through Amazon Web Services, or AWS. Its shares trade on the Nasdaq under the ticker AMZN. Amazon had 1,638,000 full time and part time employees at the end of the quarter, not counting contractors and temporary staff. ^[1][3]

Its newer businesses include Amazon Pharmacy, the Zoox robotaxi service and Amazon Leo, a low Earth orbit satellite service. The release says Zoox has begun offering paid rides in Las Vegas and that Leo remains on track to begin initial service later this year. In the release chief executive Andy Jassy said "Our broader selection and speedier delivery are helping us capture more retail market segment share with improving margins, and our newer businesses, ranging from Grocery to Pharmacy to Amazon Leo to Zoox are progressing encouragingly." ^[1]

Three segments

Amazon reports three segments. North America is mainly made up of money earned from retail sales of consumer products, including sales by other sellers, and from advertising and subscription services through online and physical stores focused on North America. International is mainly made up of the same kinds of income earned through what Amazon calls internationally focused online stores. AWS is mainly made up of money earned from global sales of compute, storage, database and other services for start ups, enterprises, government agencies and academic institutions. ^[1][3]

AWS did most of the growing. Its net sales rose to $45,984 million from $42,232 million in the second quarter, and Amazon reported growth of 39% from a year earlier. It earned $17,773 million of operating income, almost two thirds of the company total (Dalsna Finance calculation: $17,773 million divided by $28,076 million), at an operating margin of 38.7% as reported. North America earned $8,723 million at a 7.7% margin and International $1,580 million at a 3.7% margin. Amazon put AWS at a $184 billion annualized revenue run rate, and Jassy said AWS projects revenue growth rates of over 40% in both 2027 and 2028 (a company projection, as stated in the release). ^[1][2]

Timing also matters when comparing the two quarters. Amazon said Prime Day moved this year and took place in the second quarter for most large countries, while in 2025 it fell entirely in the third quarter. It said third quarter total net sales growth from a year earlier would have been about 400 basis points, or 4 percentage points, higher without that shift. It did not give a figure for each segment. ^[1]

Net sales by type

Amazon also splits its net sales by what it sells. Online stores, its own product sales and digital media, came to $68,470 million in the third quarter. Third party seller services, which are commissions and fulfillment and shipping fees paid by other merchants, brought in $46,492 million. Advertising services were $19,637 million and subscription services, which include Amazon Prime membership fees and digital video, music and other subscriptions, were $14,006 million. Amazon said advertising grew 12% from a year earlier excluding currency changes, held back by timing, mainly Prime Day, and that it expects advertising growth from a year earlier in the high teens in the fourth quarter (a company projection, as stated in the release). ^[1]

The numbers, quarter over quarter

Net sales were $201,944 million in the third quarter, against $200,606 million in the second. Amazon does not report gross profit, but net sales minus its reported cost of sales rose 2.4% to $107,371 million. Operating income, which also takes off fulfillment, technology and infrastructure, marketing and administrative costs, rose to $28,076 million from $27,461 million. Net income under GAAP, the standard US accounting rules, fell to $20,685 million from $62,647 million (Dalsna Finance calculation for gross profit and the changes). ^[1][2]

Profit margin is net income as a share of net sales: 10.2% in the third quarter against 31.2% in the second (Dalsna Finance calculation: $20,685 million divided by $201,944 million, and $62,647 million divided by $200,606 million). The operating margin, operating income divided by net sales, was 13.9%, which Amazon called its highest operating margin ever, against 13.7%. ^[1][2]

The fall in net income came from below the operating line. Amazon said second quarter net income included $53.4 billion of non operating pre tax other income, mainly from its investments in Anthropic. In the third quarter total non operating items were a net loss of $1,207 million, made up of $1,187 million of interest income, $1,691 million of interest expense and a $703 million other loss. The quarterly report says the gains so far in 2026 came mainly from upward adjustments for observable price changes in its nonvoting preferred stock in Anthropic and from converting part of its Anthropic convertible notes. ^[1][2][3]

Against the third quarter of 2025, net sales were up 12.1% from $180,169 million, which Amazon rounds to 12%, and net income was down 2.4% from $21,187 million (Dalsna Finance calculation). Amazon said the year earlier quarter included $9.5 billion of pre tax gains from its investments in Anthropic. ^[1]

Earnings per share

Earnings per share, or EPS, is profit divided by the number of shares. The diluted figure also counts shares that could be created from stock awards. Amazon reported diluted EPS of $1.89 for the third quarter and $5.75 for the second. Dividing net income by the diluted share count gives the same figures. ^[1][2]

Amazon reports no adjusted net income and no adjusted EPS. Its own non GAAP measures are free cash flow and results excluding currency changes. Amazon defines free cash flow as cash from operations minus purchases of property and equipment, net of proceeds from sales and incentives, and reports it for the trailing twelve months. Over the twelve months to September 30, 2026 operations brought in $168,300 million and net purchases of property and equipment were $210,657 million, an outflow of $42,357 million. Amazon said the rise in purchases mainly reflects investment in artificial intelligence. So this article uses trailing free cash flow as its second measure and calls it by that name. Per share, on the 10,813 million shares on the cover of the latest quarterly report, it was an outflow of $3.92 at September 30 and $0.70 at June 30 (Dalsna Finance calculation). It is a cash measure, not earnings. ^[1][4][2][3]

What the market values Amazon at

Market capitalization, or market cap, is what the stock market values the whole company at: the share price times the number of shares. Amazon's shares closed at $240.35 on Friday, October 30, 2026, as reported by StockAnalysis. The cover of its third quarter report to the SEC lists 10,813,138,306 shares of common stock outstanding as of October 21, 2026. That gives a market cap of about $2.60 trillion (Dalsna Finance calculation). Every multiple and share price below uses this one share count. ^[5][3]

Six valuation multiples

The price to earnings ratio, or P/E, is market cap divided by a year of earnings. It shows how many dollars the market is paying for each dollar of yearly profit. Annualised means one quarter multiplied by four. On that basis Amazon has a P/E of 31.4 (Dalsna Finance calculation: $2,598.9 billion divided by $20,685 million times 4, which is $82,740 million). ^[1][5][3]

The second measure divides market cap by free cash flow. We call it market cap to free cash flow, because free cash flow is not earnings. Amazon reports free cash flow only for twelve month periods. Worked out for the third quarter alone from its cash flow statement, it was an outflow of $33,456 million: $42,422 million of operating cash minus $77,259 million of purchases of property and equipment plus $1,381 million of proceeds and incentives (Dalsna Finance calculation). Annualised it stays an outflow, so the multiple is not meaningful, because dividing by a negative number says nothing about how expensive the shares are. ^[1]

A forward P/E uses an estimate of future earnings. IG reported on October 28, 2026, before the results, that the LSEG estimate for full year 2026 EPS is $13.00, which IG said is above the consensus mean. Multiplying that by the same 10,813 million shares gives estimated earnings of about $140,571 million and a forward P/E of 18.5 (Dalsna Finance calculation on an estimate, the LSEG estimate as reported by IG). Two of the four quarters in that year had been reported when the estimate was made, and a third had ended but not yet been reported. The reported quarters include large Anthropic gains, so this forward P/E includes those gains. We found no published estimate of free cash flow, so there is no forward market cap to free cash flow. ^[6][5][3]

A trailing P/E, sometimes called a historical P/E, uses the last four reported quarters. Amazon reports net income of $134,779 million for the twelve months to September 30, 2026, which gives a trailing P/E of 19.3 (Dalsna Finance calculation). It is low next to the annualised P/E because the first nine months of 2026 included $68,171 million of non operating income, mostly from the Anthropic investments. Trailing free cash flow was an outflow of $42,357 million, so the trailing market cap to free cash flow is not meaningful either. ^[1][5][3]

The last four quarters

Amazon's third quarter release shows net income for each of the last six quarters and free cash flow for the twelve months ending at each quarter, so every figure here is as reported and none is worked out. Because each free cash flow figure already covers twelve months, the four of them are not added up. Net income over the four quarters to September 30, 2026 was $134,779 million, and $62,647 million of it came in the second quarter. ^[1]

Two base cases: the third quarter held flat for a year

Suppose net sales stayed at the third quarter's level for a full year, with no growth and no decline: $201,944 million times 4, or $807,776 million. The first base case keeps the 10.2% profit margin, which gives earnings of $82,740 million, or $7.65 per share on the cover share count. This case is simply the latest quarter annualised, so at the annualised P/E it returns the October 30, 2026 close of $240.35 by construction. The other cells only show how the price moves when the same earnings are given a different multiple. ^[1][5][3]

Non operating items swing Amazon's net income from quarter to quarter. They lifted the second quarter by $53,396 million and the first nine months of 2026 by $68,171 million, and in the third quarter they were a net loss of $1,207 million. So the second base case uses the 13.9% operating margin, which leaves out interest, taxes and other income altogether: $112,304 million a year, or $10.39 per share. Operating income is counted before tax, so this is not net income. We found no one time item inside third quarter operating income that Amazon put a figure on, so nothing else is taken out. ^[1][2][3]

There is no free cash flow base case. Free cash flow was an outflow for the quarter and for the trailing twelve months, so no multiple can turn it into a share price. The P/E multiples apply to both earnings rows. The market cap to free cash flow multiples do not apply to earnings, so they are left off the grid. ^[1]

What to watch

Amazon guided to fourth quarter net sales of $240.0 billion to $247.0 billion and operating income of $28.5 billion to $33.5 billion, against $25.0 billion in the fourth quarter of 2025. It said it still expects cash capital expenditures of about $220 billion for 2026. These are the company's own expectations as of October 29, 2026, and it called them subject to substantial uncertainty. The next report will show whether operating cash catches up with that spending. ^[1]

Amazon is also investing heavily in AI companies and borrowing more. The quarterly report says it invested $50.0 billion in OpenAI preferred stock in the first nine months of 2026, $21.3 billion of it in the third quarter, and $10.0 billion in Anthropic nonvoting preferred stock. Long term debt rose to $173,125 million at September 30, 2026 from $65,648 million at the end of 2025. Because changes in the value of these holdings pass through other income, readers may want to watch non operating items as closely as operating income. In the release Jassy said there has never been a trillion dollar revenue business and that Amazon may have two of them in the next 5 to 10 years (a paraphrase of his sentence, which writes the range with a dash). ^[1][3]

How these figures were made: inputs come from Amazon's earnings releases for the second and third quarters of 2026 and its third quarter 2026 quarterly report on SEC EDGAR, plus the dated closing price and the dated estimate report named above. Calculations use unrounded inputs and are rounded only at the end, with multiples to one decimal and per share figures and prices to the cent. ^{[1][3][2][5][6]}