Amazon's AI Spending Gap Threatens Free Cash Flow and Share Price

Amazon's aggressive spending on AI and cloud infrastructure has led to a widening gap between its capital expenditures and operating cash flow. In Q3 2026, the company's management raised its spending plan from $200 billion to around $220 billion, with most of this allocation going towards AI and AWS.

This increased spending is putting pressure on Amazon's free cash flow, which was already negative $11.6 billion over the last twelve months. The company's operating income is expected to be between $22.5 billion and $26.5 billion in 2026, but a result below this range would indicate weaker profitability.

Amazon currently holds around $123 billion in cash and short-term investments, which could cover its roughly $59 billion shortfall for the year. However, the company's total debt of $223.2 billion limits its ability to take on further leverage or refinancing obligations.