Is Amazon Spending Too Much On AI?

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Amazon (AMZN) is spending more today than its own cash flow covers, although the company has run a deeper cash gap before. Over the 12 months to June 2026, the company’s free cash flow, the cash left after capital spending, was negative $11.6 billion. So how far does Amazon’s spending now run past its cash, and what has happened to its debt?

Amazon Is Outspending Its Cash As Its Debt Grows

Amazon spent $173 billion on capital projects over the 12 months to June 2026, exceeding the $161 billion of cash its operations brought in. A year earlier, its free cash flow was a positive $13.5 billion. Over the same year, Amazon’s total debt climbed to $223 billion from $134 billion. That $89 billion increase is far larger than the year’s cash gap. Alphabet, by contrast, still recorded $53.3 billion in free cash flow over the same 12 months. Its build is paid for by the cash its business generates; Amazon’s is not.

The company has operated further below zero before and recovered. Amazon posted negative $29.8 billion in free cash flow during the 12 months to June 2022, before reaching a positive $48.3 billion two years later.

Where Is Amazon’s Extra Spending Going?

Management says this capital is going mainly into AWS and generative AI to meet strong customer demand. During the July 30, 2026 call, management reported $53.1 billion in cash capital spending for fiscal Q2 2026 alone.

By management’s account, that demand is already on the books. Amazon’s backlog reached $496 billion on that call, growing at a triple-digit percentage rate from a year earlier. Management added that Amazon remains on track to double its 2025 power capacity by the end of 2027.

The heavier debt load also carries a larger interest bill. Amazon recorded $3.33 billion in interest expense over the 12 months to June 2026, up from $2.23 billion a year earlier.

Amazon’s Operating Margin Is At A Ten-Year High

Amazon recorded a 12.1% operating margin over the 12 months to June 2026, marking its highest level across the 40 quarter ends since fiscal Q3 2016. Operating income grew to $93.7 billion from $76.2 billion a year earlier. The current build comes from a business keeping more of each sales dollar as profit than at any point in those ten years, not from one under strain.

Amazon still faces a cash deficit, however. Even with profit at that level, the company’s operations did not generate enough cash to cover what it spent on the build.

What Should Amazon Owners Watch Next?

Owners should watch free cash flow, one quarter at a time. Amazon posted negative $18.2 billion in free cash flow during fiscal Q1 2026, followed by negative $8.82 billion in fiscal Q2 2026. The company will detail its next free cash flow figure in its fiscal Q3 2026 report.

How To Act On AMZN?

Not necessarily on Amazon.com alone, if your goal is long-term wealth. Wealth is built by owning the companies that keep outperforming, the leaders of their industries, wherever they are. Amazon.com is one. Over the five years to October 2026, its stock rose 49%, ahead of 12 of the 13 other companies in Broadline Retail, where the typical company fell 52%.

Finding companies like these takes comparison across industries and sectors, and that is what the Trefis High Quality (HQ) Portfolio does. It holds 30 quality companies in equal weight and, since its inception in September 2020, has returned more than 105%, ahead of a benchmark that combines the S&P 500, S&P Mid-cap and Russell 2000. See how we find the leaders.

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