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TL;DR
Amazon said AWS revenue rose 39% in the third quarter, its fastest growth since late 2021, while contracted future revenue climbed to $578 billion. The company also reported $75.9 billion in quarterly cash capital spending, negative trailing 12-month free cash flow and results that missed some analyst expectations; its shares fell more than 6% in after-hours trading, according to the source report.
Amazon’s cloud unit grew 39% in the third quarter, its fastest rate since the end of 2021, as the company spent $75.9 billion in cash capital investment in the quarter, primarily on AWS and artificial intelligence, according to Amazon executives. Amazon shares fell more than 6% in after-hours trading after the results, as investors weighed the investment pace alongside earnings and holiday-quarter guidance that fell short of some expectations.
AWS revenue reached $46.0 billion for July through September, while its operating income rose 55% to $17.8 billion, according to Amazon’s results. CEO Andy Jassy said AWS had $578 billion in contracted future revenue, up from $496 billion three months earlier. The company’s source report says AWS growth accelerated for a sixth consecutive quarter, from 17% in the second quarter of 2025 to 39% in the latest quarter, excluding currency effects.
Chief Financial Officer Brian Olsavsky said quarterly cash capital spending of $75.9 billion primarily related to AWS and AI. Jassy said most of Amazon’s roughly $220 billion planned capital spending for 2026 would go to AWS, and the company expects to spend “meaningfully more” in 2027. Amazon’s property and equipment rose from $357.0 billion at the end of 2025 to $508.9 billion at the end of September, a $151.9 billion increase over nine months.
The spending coincided with a sharp change in cash flow. Amazon reported trailing 12-month free cash flow of negative $42.4 billion, compared with positive $14.8 billion a year earlier. Over the same period, operating cash flow was $168.3 billion and capital spending was $210.7 billion. The source report estimates quarterly free cash flow at about negative $33.5 billion, calculated from the company’s figures; that estimate is not presented as a directly reported quarterly figure.
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.
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The Cost of AWS Capacity
The results show a widening gap between AI infrastructure spending now and the revenue that capacity may generate over time. AWS’s contracted revenue provides evidence of customer commitments, but it does not mean Amazon has already collected that money. The company must fund construction, equipment and related costs before all the capacity is installed and used.
For cloud customers, Amazon’s investment could mean more available computing capacity, including for AI workloads, as new data centers and chips come online. The source report says large blocks of AI capacity are being reserved well in advance and that short-term capacity on older AI chips is selling at a premium. The scale and timing of supply, pricing and delivery remain relevant to customers planning projects.
For investors, the central tension is whether future AWS revenue and operating profit will justify the cash outlay. AWS operating income rose 55%, but Amazon’s overall free cash flow turned negative as capital investment climbed. The share-price decline indicates that strong cloud growth alone did not settle concerns about returns, costs and results in other parts of the business.
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How Amazon’s Investment Expanded
Amazon’s spending plan has risen during 2026. The source report says the company planned about $200 billion in capital spending in February, then raised its outlook in July, citing higher memory prices. It now expects about $220 billion for the year. Olsavsky linked the latest quarter’s cash spending mainly to AWS and AI, while Jassy said the majority of the 2026 plan would support AWS.
The investment includes data-center buildings, equipment and Amazon-designed chips. Jassy said the company installs an AI accelerator about every 14 seconds and that its Trainium and Graviton chip businesses are growing quickly. Amazon said customers saved more than $2 billion in the quarter by using its chips; that figure is the company’s own estimate. Jassy also said Amazon plans to sell Trainium chips outside AWS from late 2027.
Amazon’s balance sheet reflects the build-out: long-term debt rose from $65.6 billion to $173.1 billion over the first nine months of the year, according to the source report. Depreciation and amortization, which spreads the cost of assets over their useful lives, increased 25% to $20.9 billion in the quarter. These costs mean that investment can affect reported results over several years, not only when equipment is purchased.
““Meaningfully more.””
— Andy Jassy, Amazon chief executive
Returns and Capacity Remain Unclear
Amazon has not specified when its current investment cycle is expected to produce returns at a level that would offset the cash outlays. The $578 billion AWS order book represents contracted future revenue, not cash already received, and the source report does not detail when those commitments will convert into sales or how much profit they will generate.
The precise division of spending among data centers, chips, power and other equipment is also not disclosed in the supplied material. Jassy pointed to higher memory costs, while Amazon’s guidance cited energy prices and supply volatility, including for memory chips. The source report says Amazon did not state how much of its investment goes to power infrastructure.
Other pressures may also have influenced the stock reaction. The source report says earnings per share of $1.89 missed analysts’ $1.96 estimate, advertising revenue fell short of expectations, and the holiday-quarter revenue forecast was slightly below expectations. Those comparisons are attributed in the source to CNBC, LSEG and StreetAccount data. The available material does not quantify how much each item contributed to the after-hours decline.
Spending and Holiday Sales in Focus
Investors will watch whether Amazon maintains its plan for about $220 billion in 2026 capital spending and what the company’s “meaningfully more” outlook for 2027 means in dollar terms. They will also look for evidence that new AWS capacity is being brought online and converted into revenue, and for any change in management’s account of supply constraints, memory costs or energy needs.
The next near-term test is Amazon’s holiday quarter. The company’s guidance came in slightly below analyst expectations, according to the source report, putting attention on consumer demand as well as cloud growth. Future results can show whether advertising and retail performance strengthen and how operating costs develop alongside the infrastructure build-out.
Amazon’s earnings release and call provide the confirmed figures available in this report. The timing of investment returns, the detailed spending mix and the pace at which contracted AWS demand becomes cash revenue remain open questions as the company continues its build-out.
Key Questions
How fast did AWS grow in the third quarter?
AWS revenue rose 39% year over year to $46.0 billion for July through September, its fastest growth rate since the end of 2021, according to Amazon’s results.
How much did Amazon spend in the quarter?
Amazon reported $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 AWS growth accelerated?
The source report says shares fell more than 6% in after-hours trading. Investors were weighing the spending and negative free cash flow alongside an earnings-per-share miss, advertising revenue below expectations and holiday-quarter revenue guidance that was slightly below expectations.
What does AWS’s $578 billion order book mean?
CEO Andy Jassy said AWS had $578 billion in contracted future revenue, up from $496 billion three months earlier. It signals customer commitments, but it is future revenue rather than cash already collected; the timing and profitability of those commitments are not specified in the supplied material.
What remains uncertain about Amazon’s AI investment?
The company has not said when the spending is expected to generate returns sufficient to offset its cash cost, nor disclosed a detailed breakdown of investment by data centers, chips and power. The pace at which contracted demand becomes revenue and profit is also unclear.
Source: ThorstenMeyerAI.com
