Shares of Amazon (AMZN) fell 2.22% to $238.37 as record investment in artificial intelligence increased pressure on the company's cash flow. The company reported a $42.4 billion free cash flow outflow over the 12 months through September, its largest deficit on record, even as it continued to expand its cloud infrastructure, with AWS revenue accelerating and management maintaining its aggressive spending plans.

The report highlighted the scale of Amazon's artificial intelligence buildout: its cloud business is growing at its fastest pace in years, while the data center expansion behind that growth has produced a record cash deficit.

Amazon Records Its Largest Free Cash Flow Outflow

Amazon's latest quarterly results revealed a sharp deterioration in its free cash flow position. The company recorded a $42.4 billion outflow over the 12 months through September 2026, marking its largest cash flow deficit since it began reporting the current financial measure. Free cash flow — the cash remaining after operating costs and capital investments — is a widely tracked gauge of whether a company can fund expansion from its own resources rather than outside financing.

Amazon's cash flow position had weakened rapidly during the latest quarter. The new figure nearly doubles the previous record outflow of $23.5 billion in June 2022, a decline that followed heavy investment in warehouse infrastructure and distribution capacity. Three months earlier, the company's trailing free cash flow outflow stood at less than $8 billion.

Capital expenditure increased sharply as Amazon expanded its data centers and other infrastructure. Spending on property and equipment reached approximately $77 billion between July and September, well above the $35 billion recorded during the same period last year. Meanwhile, the company generated approximately $42 billion from its operations during the quarter, leaving a cash flow gap of roughly $33 billion over three months.

AWS Growth Supports Amazon's Heavy AI Investment

Despite the rising expenditure, Amazon's cloud business delivered stronger revenue growth in the third quarter. Amazon Web Services generated approximately $46 billion in revenue, a 39% annual increase that marked the unit's fastest growth rate in nearly five years. AWS also reported an operating margin of nearly 14%, its highest level on record, underscoring the contribution of cloud computing to the company's overall operating performance.

The division has continued to attract major artificial intelligence customers through its expanding computing infrastructure. Anthropic's computing commitments represented approximately one-fifth of AWS's backlog as of June, a figure that reflects the scale of demand from leading AI developers building on Amazon's cloud services. Backlog, which represents contracted future business, provides a measure of committed demand behind a cloud unit's growth trajectory. Chief Executive Andy Jassy has projected AWS growth above 40% in both 2027 and 2028.

Amazon plans to maintain its infrastructure expansion despite the substantial cash requirements. The company expects capital expenditure to reach approximately $220 billion in 2026, with most of the spending supporting AWS, and management also anticipates higher expenditure in 2027.

Rising Debt and Weak Stock Performance Add Pressure

Amazon has increasingly relied on borrowing to finance its expanding infrastructure needs. Its long-term debt reached approximately $173 billion at the end of September, a significant increase from approximately $66 billion at the end of 2025. Over the same span, the company's cash balance declined to approximately $56 billion from roughly $87 billion at the end of 2025.

Credit markets have registered the shift in Amazon's finances. The cost of credit default swaps insuring the company's five-year debt against default has climbed approximately 50% since early August, according to Bloomberg data. Calculations based on those prices point to an implied five-year default probability of approximately 7%, up from roughly 5% previously, reflecting heightened concern in credit markets.

The stock has come under pressure alongside the balance sheet. Amazon shares dropped approximately 4% on Thursday, their lowest closing level since July 30, amid broader weakness among major technology companies, including Alphabet. The shares extended their losses in after-hours trading following misses on quarterly revenue, earnings, and the holiday-quarter profit outlook.

The decline adds to mounting pressure on technology companies carrying substantial AI infrastructure budgets. For Amazon, the central question is whether AWS's accelerating revenue and record margins can keep pace with a spending program set to reach approximately $220 billion in 2026 and rise further in 2027. Markers to watch include execution against that capital plan, whether cloud growth tracks the above-40% trajectory management has projected for 2027 and 2028, and how the company's debt load and cash position evolve in coming quarters. Nevertheless, Amazon has maintained its planned investment schedule despite the record cash flow outflow, and its next financial performance will show how effectively AWS growth supports the company's expanding infrastructure costs.

Source: Blockonomi