🔍 Read the full analysis: AWS Is Growing At Its Fastest Pace In Five Years, Fueled By Cash Spending on ThorstenMeyerAI.com
Get movie nights delivered free with Prime
- Fast, free delivery on millions of items
- Prime Video, Amazon Music and more included
- Member-only deals all year
TL;DR
AWS revenue grew 39% to $46 billion in the third quarter, its fastest growth since the end of 2021, while Amazon reported a $578 billion contracted order book. Amazon also spent $75.9 billion on capital projects during the quarter, and its trailing 12-month free cash flow fell to negative $42.4 billion. Its shares dropped more than 6% in after-hours trading as investors weighed the spending and weaker-than-expected results in other areas.
Amazon Web Services revenue climbed 39% in the third quarter to $46 billion, its fastest growth since the end of 2021, as Amazon spent $75.9 billion in cash on capital projects, primarily for cloud and artificial-intelligence infrastructure, according to the company’s results and earnings call. Amazon shares fell more than 6% in after-hours trading on Thursday as investors weighed the heavy investment, weaker-than-expected earnings per share and other results against the cloud unit’s acceleration.
AWS operating income rose 55% to $17.8 billion, Amazon reported. Chief Executive Andy Jassy said AWS had $578 billion in contracted future revenue, up from $496 billion three months earlier. That figure represents contracted revenue to be recognized over time, not cash already received. The $82 billion increase in the order book in one quarter points to substantial demand, while leaving open how quickly AWS can bring capacity online and convert commitments into sales.
Chief Financial Officer Brian Olsavsky said the quarter’s $75.9 billion in cash capital spending primarily related to AWS and AI. Jassy said most of the approximately $220 billion Amazon expects to spend in 2026 would go to AWS, and the company expects spending to be “meaningfully more” in 2027. Amazon had raised its 2026 spending plan from about $200 billion in July, citing higher memory prices, according to the source material.
The financial strain is visible in cash flow. Amazon’s free cash flow over the 12 months ending in the third quarter was negative $42.4 billion, compared with positive $14.8 billion a year earlier. Its reported cash generated from operations over that period was $168.3 billion, while capital spending was $210.7 billion. The source article estimates quarterly free cash flow at about negative $33.5 billion using its own arithmetic; that figure is not presented here as an Amazon-reported measure.
Infographic 01 · The scorecard
Fastest cloud growth in five years, deepest cash gap.
Amazon’s third quarter (July to September 2026), scored against the four numbers from my 28 October preview.
The four numbers from my preview, scored for Amazon
Status chips: ok = healthy, hold = watch, urgent = warning sign. My assessment.
- 1 · Capex planAbout $220B for 2026, unchanged holdRaised from $200B in July, citing memory prices. 2027: “meaningfully more”, no number.
- 2 · Cloud vs. capexAWS +39%, operating income +55% holdGross capex +120% vs. a year earlier ($77.3B vs. $35.1B, my arithmetic). Revenue grows fast; spending faster.
- 3 · Free cash flow + fundingDeeply negative, financed with bonds urgentAbout −$33.5B in the quarter (my arithmetic). $48.1B of new long-term debt in Q3.
- 4 · CapacityCustomers take it as fast as it is installed okBacklog +$82B in one quarter. Big blocks reserved well in advance; visibility into 2027–2028.
What beat
- AWS revenue $45.98B vs. $45.29B expected
- AWS operating income $17.77B vs. $16.97B expected
- Operating margin 13.9%, Amazon’s highest ever
What missed
- Earnings per share $1.89 vs. $1.96 expected
- Advertising $19.64B vs. $20.82B expected
- Q4 revenue guide midpoint $243.5B vs. $244.5B expected
- Shares down more than 6% after hours (CNBC; GeekWire: more than 7%)
Sources: Amazon Q3 2026 release, 29 Oct 2026; Amazon Q3 call, third-party transcript; CNBC, 29 Oct; CNBC, 30 Jul; GeekWire, 29 Oct. Analyst expectations as reported by CNBC (LSEG, StreetAccount). Quarterly free cash flow and capex growth: my arithmetic from Amazon’s cash flow statement. Status chips: Thorsten Meyer.
Powered by Thorsten Meyer AI
AI Demand Meets Amazon’s Investment Bill
The results show the tension at the center of the AI cloud race: customer commitments are growing, but the data centers, chips, equipment and other capacity needed to serve them require cash well before all the related revenue arrives. Amazon’s order book is evidence of contracted demand, while the negative free cash flow shows the near-term cost of building to meet it. The timing and returns on that investment remain key concerns for shareholders.
The spending also matters to companies that rent computing capacity. When major cloud providers reserve or build large amounts of infrastructure, customers may face different availability, pricing and contract terms for AI services. Amazon says some AI capacity is booked well in advance and that short-term access to older AI chips can sell at a premium. Those are the company’s descriptions of market conditions; the results do not establish how broadly customers will experience shortages or higher prices.
For Amazon, the bet is that owning infrastructure and designing chips can support future growth and margins. The company says customers saved more than $2 billion during the quarter by using its own chips, but that is an Amazon-reported figure, not an independently verified estimate. The investment’s eventual profitability will depend on demand, operating costs, utilization and the pace at which new capacity becomes usable.
Popular right now
Ninja Foodi DualZone 10-Qt Air Fryer, 6-in-1, Black (DZ302)
KitchenAid Classic Series 4.5-Quart Tilt-Head Stand Mixer, Onyx Black
Dyson V8 Cyclone Cordless Vacuum
As an affiliate, we earn on qualifying purchases.
AWS Growth and Spending Timeline
AWS growth has accelerated across six consecutive quarters, according to the figures in the source material: 17%, 20%, 24%, 28%, 37% and 39%, beginning in the second quarter of 2025 and excluding currency effects. The latest result marks a sharp rise from the 17% pace at the start of that run. AWS’s operating income also increased, indicating that the quarter’s growth was accompanied by higher reported operating profit, even as Amazon’s broader investment program weighed on cash flow.
Amazon’s property and equipment rose from $357 billion at the end of 2025 to $508.9 billion at the end of September, an increase of about $152 billion over nine months, according to the source. Jassy said Amazon was “installing an AI accelerator about every 14 seconds.” Amazon develops its Trainium AI chips and Graviton processors and says commitments for both product lines rose more than 20-fold in a year. The company has also said it plans to sell Trainium chips outside AWS beginning in late 2027.
Amazon’s investment plans are part of a broader push by major technology companies to build AI computing capacity. The costs extend beyond servers to land, buildings, memory, power and long-lived equipment. Amazon said depreciation and amortization rose 25% to $20.9 billion in the quarter, reflecting costs from assets spread over their useful lives. The company also announced a $1 billion “Built Together” commitment for communities near its U.S. data centers, including energy and water efficiency projects.
Returns and Capacity Remain Unclear
Amazon has not disclosed a detailed breakdown of the $75.9 billion quarterly spend by data centers, chips, power and other categories, nor how much of the planned investment will be in service by particular dates. The company’s 2027 forecast is also qualitative: it expects to spend “meaningfully more,” but has not stated a total. It is not clear how quickly the new infrastructure will generate revenue or whether demand will remain strong enough to keep it highly utilized.
The $578 billion order book is a measure of contracted future revenue, but the source material does not specify its full timing, cancellation terms or how much is tied specifically to AI. It also does not establish whether reported customer savings from Amazon’s chips will translate into equivalent savings across the AWS customer base. Amazon’s claim about the margin disadvantage of renting capacity from specialized providers is a competitive argument, not an independently audited result.
Amazon shares fell more than 6% in after-hours trading, but the source material does not establish that spending alone caused the decline. It also reports that earnings per share of $1.89 missed the $1.96 analyst expectation, advertising revenue fell short of expectations, and the holiday-quarter revenue forecast was slightly below forecasts. The relative contribution of each factor to the market reaction is not specified.
Watch Spending and Holiday Guidance
Investors will be watching Amazon’s next results for updates on capital spending, free cash flow and AWS growth, along with evidence that new capacity is coming online and generating revenue. The company’s stated plan is to spend about $220 billion in 2026 and meaningfully more in 2027, so any change to those expectations could affect views of the scale and duration of the investment cycle.
The near-term test is Amazon’s holiday-quarter performance. Its revenue forecast came in slightly below analyst expectations, according to the source material, adding retail and advertising results to the questions raised by AWS’s spending. The next earnings report should give a clearer view of seasonal demand and whether cash generated by operations is keeping pace with capital outlays. Until then, the key unresolved issue is how quickly Amazon can turn its growing AI commitments into operating capacity and cash returns.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue increased 39% year over year to $46 billion, Amazon reported. The company described this as its fastest growth since the end of 2021.
How much did Amazon spend on capital projects?
Amazon spent $75.9 billion in cash capital spending during the quarter. CFO Brian Olsavsky said the spending primarily related to AWS and AI.
Why did Amazon shares fall after the results?
Shares fell more than 6% in after-hours trading. The results included negative trailing 12-month free cash flow, an earnings-per-share miss, advertising results below expectations and a holiday-quarter revenue forecast slightly below expectations. The available source does not quantify how much each factor contributed to the share move.
What does AWS’s $578 billion order book mean?
It is the amount of contracted future revenue Jassy said AWS had, up from $496 billion three months earlier. It is not cash already collected, and the source material does not give a full breakdown of when the revenue will be recognized.
What is still uncertain about Amazon’s investment?
Amazon has not provided a detailed breakdown of the spending by category or specific dates for when the added capacity will be operational. The timing of revenue and returns from the build-out, as well as the exact 2027 spending total, remains unclear.
Source: ThorstenMeyerAI.com
