🔍 Read the full analysis: AWS Is Growing Faster Than In Years, While Amazon Pays With Cash on ThorstenMeyerAI.com
Get business pricing on tech for your team
- Business-only prices and quantity discounts
- Tax-exempt purchasing
- Multiple users, one account, clear invoices
TL;DR
Amazon said AWS revenue rose 39% in the third quarter, its fastest growth since late 2021, while its contracted future revenue backlog reached $578 billion. The company spent $75.9 billion on capital investment in the quarter, and trailing 12-month free cash flow fell to negative $42.4 billion; Amazon shares dropped more than 6% in after-hours trading.
Amazon’s cloud unit grew 39% in the third quarter, its fastest pace since late 2021, but the company’s $75.9 billion in quarterly capital spending helped push trailing 12-month free cash flow to negative $42.4 billion. Amazon shares fell more than 6% in after-hours trading after the results, as investors weighed strong cloud demand against the cost of building capacity and weaker-than-expected parts of the retail and advertising business.
AWS revenue reached $46.0 billion for July through September, while its operating income rose 55% to $17.8 billion, according to Amazon’s earnings release. The company’s reported growth rate has accelerated for six consecutive quarters, from 17% in the second quarter of 2025 to 39% in the latest quarter, excluding currency effects.
Chief Executive Andy Jassy said AWS’s contracted future revenue backlog rose to $578 billion, up from $496 billion three months earlier. That backlog reflects contracted demand, but it is not revenue already received: customers pay as services are delivered over time. Amazon said its cash capital spending in the quarter was $75.9 billion, primarily for AWS and AI, according to Chief Financial Officer Brian Olsavsky.
Amazon’s trailing 12-month free cash flow was negative $42.4 billion, compared with positive $14.8 billion a year earlier. The source material estimates quarterly free cash flow at about negative $33.5 billion, calculated from company figures. Amazon still expects capital spending of about $220 billion in 2026 and said it anticipates meaningfully higher spending in 2027. The company’s reported earnings per share of $1.89 also came in below the cited analyst estimate of $1.96.
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
The Cost of AWS Expansion
The results show the tension at the center of Amazon’s AI investment: customer demand is growing, while the infrastructure needed to serve it requires cash well before all contracted revenue arrives. Data centers, networking equipment and chips are paid for upfront, while the return depends on facilities being completed, customers using capacity and revenue accruing over time.
That timing matters to investors because Amazon is committing capital at a scale that is already affecting free cash flow and increasing its reliance on long-term financing. The supplied figures show long-term debt rising from $65.6 billion to $173.1 billion over the first nine months of 2026. The spending may support AWS growth and future earnings, but the pace of returns and the eventual utilization of new capacity remain key questions.
For cloud customers, the backlog suggests that substantial demand is being booked ahead of delivery. The source account says large blocks of AI capacity are reserved well in advance and that short-term availability on older AI chips can command a premium. This could affect access and pricing, although Amazon did not provide a broad customer price forecast in the supplied material. For shoppers, the reported results do not establish a direct change to prices or service; the immediate investor concern is the company’s overall cash generation and its holiday-quarter outlook.
Products Worth Considering
Bose QuietComfort Wireless Bluetooth Headphones with Active Noise Cancellation, Mic, USB‑C Charging, Deep Bass, 24‑Hour Battery – White Smok
Amazon Kindle Paperwhite Signature Edition (12th Generation, 2024), 32 GB, Metallic Black
Apple AirPods Pro 3 Wireless Earbuds with Active Noise Cancellation
As an affiliate, we earn on qualifying purchases.
How the Spending Accelerated
Amazon raised its 2026 capital-spending plan from about $200 billion to $220 billion, according to the source material, citing higher memory prices when it revised the forecast in July. Jassy said most of the planned 2026 investment would go to AWS. Olsavsky said the quarter’s spending primarily related to AWS and AI. The company has not disclosed a complete breakdown of spending by category.
Amazon’s property and equipment increased from $357.0 billion at the end of 2025 to $508.9 billion at the end of September. Depreciation and amortization, which spreads the cost of assets over their useful lives, rose 25% to $20.9 billion in the quarter. The company is also investing in its own Trainium AI chips and Graviton processors. Jassy said Amazon plans to offer Trainium chips outside AWS from late 2027; Amazon’s claims about customer savings and chip commitments are company statements, not independent measures in the supplied material.
The market reaction followed a set of results with both strong and weaker signals. Besides the cited earnings-per-share miss, the source material says advertising revenue missed expectations and Amazon’s holiday-quarter revenue forecast was slightly below analyst expectations. The article’s source account attributes the share decline to the combination of heavy investment and those shortfalls, rather than to AWS growth alone.
Returns on the New Capacity
Amazon has not said exactly how much of its investment is going to data-center construction, chips, power, networking or other equipment. It also has not provided a schedule showing when the $578 billion backlog will convert into recognized revenue or how much of that contracted demand is specifically for AI services.
The company’s capital plan leaves the scale of spending high, but the timing and profitability of the resulting capacity are uncertain. Jassy argued that owning or leasing infrastructure can be more profitable than renting it from specialist providers; that comparison is his claim, not an independently verified figure in the supplied material. It is also not clear from the reported results how quickly AWS can turn new capacity into cash or whether customers’ demand will remain strong enough to fill it.
Amazon’s holiday-quarter revenue forecast was described as slightly below expectations, but the supplied material does not provide the forecast range or the precise analyst comparison. It also does not establish whether the after-hours share decline will persist once regular trading resumes.
Spending and Holiday Sales Ahead
Investors will watch Amazon’s next quarterly results for updates on AWS growth, capital expenditure, free cash flow and the pace at which new infrastructure is put to work. The company’s forecast of about $220 billion in 2026 investment, followed by meaningfully higher spending in 2027, makes those figures central to evaluating the build-out.
The holiday quarter will also test the retail and advertising outlook after the reported misses and a revenue forecast below expectations. Further disclosures about capacity, costs and customer demand could clarify whether AWS’s accelerating growth is generating cash quickly enough to offset the investment burden. Amazon has not supplied a detailed timetable for that balance.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue rose 39% year over year to $46.0 billion in July through September, according to Amazon. The company described this as its fastest growth rate since late 2021.
Why did Amazon shares fall after the results?
Amazon shares fell more than 6% in after-hours trading. The source account points to the scale of capital spending and negative free cash flow, as well as earnings per share, advertising and holiday-quarter revenue results that came in below cited expectations. The market move alone does not establish a single cause.
What does the $578 billion AWS backlog mean?
It is the value of AWS’s contracted future revenue, according to Jassy, up from $496 billion three months earlier. It is not cash already collected, and the supplied material does not specify when all of it will be recognized as revenue.
How much is Amazon spending on capital projects?
Amazon reported $75.9 billion in cash capital spending for the third quarter. It expects about $220 billion for 2026 and said spending in 2027 would be meaningfully higher.
Does the report mean Amazon will raise prices for shoppers?
No such change is confirmed in the reported material. The results describe investment in AWS and AI infrastructure; they do not establish a direct effect on Amazon retail prices or shopping services.
Source: ThorstenMeyerAI.com
